News Release ljzn080513b

7. Consolidated Statements of Cash Flows

Supplemental information

Note:

The amounts in the year ended March 31, 2007 have been changed from those previously released. See "2. Principal Accounting Policy, etc. (8) Retrospective application of equity method for an investee" in the foot note ("Significant Matters Pertaining to the Preparation of Consolidated Financial Statements").

Significant Matters Pertaining to the Preparation of Consolidated Financial Statements

The consolidated financial statements of NTT have been prepared in conformity with accounting principles generally accepted in the United States of America (Accounting Principles Board Opinions, Statements of Financial Accounting Standards, etc.)

1.	Application of New Accounting Standard

Accounting for Certain Hybrid Financial Instruments

Effective April 1, 2007, NTT Group adopted Statement of Financial Accounting Standards No. 155 ("SFAS 155"), "Accounting for Certain Hybrid Financial Instruments - an amendment of the Financial Accounting Standards Board ("FASB") Statements No. 133 and 140." SFAS 155 permits an election for fair value remeasurement of any hybrid financial instrument containing an embedded derivative that otherwise would be required to be bifurcated from its host contract in accordance with SFAS No. 133, along with certain other clarifications and amendments to SFAS No. 133 and SFAS No. 140. The adoption of SFAS 155 did not have an impact on the results of operations or financial position of NTT Group.

Accounting for Servicing of Financial Assets

Effective April 1, 2007, NTT Group adopted Statement of Financial Accounting Standards No. 156 ("SFAS 156"), "Accounting for Servicing of Financial Assets - amendment of FASB Statement No. 140." SFAS 156 provides some relief for servicers that use derivatives to economically hedge fluctuations in the fair value of their servicing rights and changes how gains and losses are computed in certain transfers or securitizations. The adoption of SFAS 156 did not have an impact on the results of operations or financial position of NTT Group.

Accounting for Uncertainty in Income Taxes

Effective April 1, 2007, NTT Group adopted FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109." FIN 48 clarifies the accounting for uncertainty in income taxes recognized in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, it also provides guidance on derecognition, classification of current or non-current, interest and penalties, disclosure and transition. The adoption of FIN 48 did not have a material impact on the results of operations or financial position of NTT Group.

2.	Principal Accounting Policies, etc

(1)

Marketable Securities

SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities" applies.

(2)

Inventories

Inventories are stated at cost, not in excess of market value. The cost of telecommunications equipment to be sold is determined by the first-in first-out method.

(3)

Property, Plant and Equipment and Depreciation

Property, plant, and equipment are stated at cost. Depreciation is computed principally using the declining-balance method with the exception of buildings for which the straight-line method is used.

(4)

Goodwill and Other Intangible Assets

SFAS 142, "Goodwill and Other Intangible Assets" applies.

(5)

Liability for Employees' Retirement Benefits

SFAS 87, "Employers' Accounting for Pensions," and SFAS 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" apply.

(6)

Derivative Financial Instruments

SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," and SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" apply.

(7)

Income Taxes

Income taxes are computed based on income (loss) before income taxes in the consolidated statements of income. According to the asset and liability approach, the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities and of operating loss carryforward are recognized as deferred tax assets or liabilities.

(8)

Retrospective application of equity method for an investee

During the year ended March 31, 2008, NTT Group acquired an additional equity interest in a company that gives the NTT Group the ability to exercise significant influence over the investee. NTT Group's equity interest was previously accounted for "Marketable securities and other investments" in the consolidated balance sheet. As a result of this acquisition of additional equity interest, the equity method of accounting was applied retrospectively by the NTT Group in accordance with APB No.18 "The Equity Method of Accounting for Investment in Common Stock." Consequently, the previously reported amounts have been revised in NTT Group's consolidated financial statements for this retrospective accounting change. The impact on the main items of financial statements in the year ended March 31, 2007 are as follows:

3.	The Transfer to the Japanese Government of the Substitutional Portion of Employee Pension Fund Liabilities

In September 2003, pursuant to the Law Concerning Defined-Benefit Corporate Pension Plans, the NTT Kosei-Nenkin-Kikin("NTT Plan") was granted an approval by the Minister of Health, Labor, and Welfare which permitted the NTT Plan to be released from future obligations to disburse the benefits covering the substitutional portion. In July 2007, NTT Plan received permission to be relieved of the remaining obligations related to past services to disburse the benefits covering the substitutional portion, and in February 2008, the NTT Plan completed the transfer to the Japanese Government of the substitutional portion of the benefit obligations and related plan assets.
This settlement resulted in a decrease in operating expenses of 317,556 million yen as "Gain on transfer of the substitutional portion of the Employee Pension Fund" in the consolidated statements of income for the year ended March 31, 2008.

4.	Deferred revenue for the future usage of telephone cards

Deferred revenue for the expected future usage of the telephone cards issued by NTT Group has been recognized at the beginning of the year ended March 31, 2008. Consequently, Operating revenue - Fixed voice related services decreased by 32,800 million yen for the year ended March 31, 2008. Such deferred revenue estimates will be evaluated every fiscal year based on the latest information available.

5.	Subsequent Event

Repurchase of Shares

On May 13, 2008, the board of directors resolved that NTT may acquire up to a total not exceeding 450,000 outstanding shares of its common stock at an amount in total not exceeding 200 billion yen from May 14, 2008 through March 24, 2009.
The board of directors, at their meeting held May 13, 2008, have resolved that, on the day immediately preceding the day on which the electronic share certificate system will be introduced, they will introduce a unit share system whereby one share of common stock will be split into 100 shares, and the number of shares constituting one unit will be set at 100. After the share split, the maximum number of shares to be repurchased will be a number calculated by first subtracting the number of shares acquired before the share split from 450,000 shares, multiplying the remainder by 100, and then adding the number of shares acquired before the share split.

Stock Split and Implementation of Unit Share System

With the scheduled implementation next January of the "Law for partial amendments to the Law concerning Book-Entry Transfer of Corporate Bonds and Other Securities for the Purpose of Streamlining the Settlement of Trades of Stocks and Other Securities (Law No. 88 of 2004)" ("Settlement Streamlining Law"), share certificates of listed companies are to take electronic form.
With the introduction of the electronic share certificate system, fractional shares will need to be eliminated. In conjunction with this process, in order to ensure that the transition away from the fractional share system will be smooth, the board of directors, at their meeting held May 13, 2008, have resolved that, subject to approval at the 23rd general shareholders meeting to be held on June 25, 2008, of the introduction of unit share system, and the approval of the Minister of Internal Affairs and Communications, on the day immediately preceding the day on which the electronic share certificate system will be introduced, one share of common stock will be split into 100 shares, and the number of shares constituting one unit will be set at 100.
Per share details for the year ended March 31, 2007 and 2008 would be as follows, if such share split was assumed to have taken place at the beginning of the year ended March 31, 2007 and at the beginning of the year ended March 31, 2008, respectively.