17. Non-Consolidated Comparative Statements of Cash Flows Significant Matters Pertaining to the Preparation of Non-Consolidated Financial Statements 1.  Valuation of certain assets (1) Securities [1] Investments in subsidiaries and affiliated companies Investments in subsidiaries and affiliated companies are stated at cost, which are determined by the moving average method. [2] Other securities a.  Marketable securities The securities whose fair value are readily determinable are stated at fair value as of balance sheet date with unrealized gains and losses directly reported as a separate component of net assets. The cost of securities sold is determined by the moving average method. b.  Non-marketable securities The securities whose fair value are not readily determinable are stated at cost, which are determined by the moving average method. (2) Inventories Supplies are stated at cost, which are determined by the last purchase cost method. 2.  Depreciation and amortization of fixed assets (1) Property, plant, and equipment (except lease assets) are depreciated by using the declining-balance method with the exception of buildings for which the straight-line method is used. Intangible assets (except lease assets) are amortized on a straight-line basis. The useful lives are calculated on the estimated cycle of the assets and the residual values are calculated based on real residual values. Internal-use software (except lease assets) is amortized on a straight-line basis over their estimated useful lives within five years. (2) Leases assets Financial leases other than those deemed to transfer ownership of properties to lessees Depreciation of property, plant and equipment is computed by the declining balance method with the exception of buildings, which are depreciated on a straight-line basis. The useful lives of the assets are the term of leases and the residual values of the assets are determined substantially. In a case where the residual value of a leased asset other than a building equals zero, depreciation of such asset is computed by multiplying ten-ninths to the equivalent amount computed by the declining balance method under an assumption that the residual value of the asset is 10% of its acquisition cost. Intangible assets are amortized over the term of leases on a straight-line basis. (Change in accounting policy)   Effective from the year ended March 31, 2008, the Company adopted Accounting Standards Board of Japan ("ASBJ") Statement No.13 "Accounting Standard for Lease Transactions", originally issued by the Corporate Accounting Council ("CAC") on June 17, 1993 and revised by the ASBJ on March 30, 2007, and applied ASBJ Guidance No.16 "Guidance on the Accounting Standard for Lease Transactions", originally issued by the Japanese Institute of Certified Public Accountants ("JICPA") on January 18, 1994 and revised by the ASBJ on March 30, 2007. Both ASBJ Statement No.13 and ASBJ Guidance No.16 were applicable during a fiscal year beginning after April 1, 2007. As a results of the application of those policies, operating income and recurring profit increased by 77 million yen and 4 million yen, respectively, and income before income taxes declined by 402 million yen. The Company did not adopt ASBJ Statement No.13 or apply ASBJ Guidance No.16 as of September 30, 2007. The lease transactions of the Company were disclosed in the notes to the non-consolidated financial statements for the six months ended September 30, 2007 in accordance with unrevised ASBJ Statement No.13 and ASBJ Guidance No.16. 3.  Allowances (1) Allowance for doubtful accounts To cover expected losses from bad debts, estimated amounts to be uncollectible are accrued, for general claims, computing on historical bad-debt ratios, and for specific claims including doubtful accounts, considering their own recoverability. No allowance is accrued as of this year-end. (2) Liability for employees' retirement benefits To provide for employees' pension benefits, benefit obligations and plan assets are estimated and accrued as of this year-end. Prior service cost is amortized on a straight-line basis over the average remaining service periods at the time of recognition. Actuarial net gain or loss is amortized on a straight-line basis over the average remaining services periods at the time of recognition. (Additional Information)   On July 1, 2007, under the Defined Benefit Corporate Pension Law, 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 past obligations to disbursethe benefits covering the substitutional portion. Based on the permission granted, the NTT Plan completed the transfer to the Japanese Government of the substitutional portion of the benefit obligations and related plan assets on February 26, 2008. This settlement resulted in recognition of 6,685 million yen as special profit in the Company's non-consolidated statements of income for the year ended March 31, 2008. 4.  Hedging Activities (1) Accounting for Hedging Activities Hedging activities are principally accounted for under "deferral hedge accounting." Designation ("Furiate-shori") is applied to forward exchange contracts and other foreign exchange contracts, and designated "exceptional accounting" ("Tokurei-shori") to interest-rate swaps that qualify for "exceptional accounting" (Accounting Standards for Financial Instruments, Footnote 14). (2) Hedging Instruments and Hedged Items [1] Hedging Instruments Hedging instruments include forward exchange contracts, currency swaps, coupon swaps (i.e. currency swap of interest portion only), interest-rate swaps, interest-rate options, and combinations of the above. [2] Hedged Items Hedged items are assets (securities, loans, receivables, etc.) and liabilities (corporate bonds, borrowings, payables, etc.) exposed to variability of fair value or future cash flows derived from fluctuations of the exchange rate, interest rate, etc. (3) Hedging Policy To hedge the foreign exchange risks regarding assets and liabilities exposed to foreign exchange risks, forward exchange contracts, currency swaps and other instruments are employed in compliance with internal rules. To hedge the interest-rate risks regarding assets and liabilities exposed to interest-rate risks, interest-rate swaps and other instruments are employed in compliance with internal rules. (4) Assessment of Hedge Effectiveness At the end of each quarter, hedge effectiveness is assessed on each hedging transaction. This quarterly assessment excludes any transaction where important terms and conditions such as principal, interest-rate and duration are identical between hedging instruments and hedged items. 5.  Consumption Taxes   Consumption tax is separately accounted for by excluding it from each transaction amount. Notes to Non-Consolidated Balance Sheets 1.  Accumulated depreciation on property, plant and equipment: March 31, 2007: 240,582 million yen March 31, 2008   240,963 million yen 2.  In compliance with the provisions of Article 9 of the Law Concerning Nippon Telegraph and Telephone Corporation, Etc., the total assets of NTT have been pledged as general collateral for corporate bonds issued. In accordance with the provisions of Article 9 of the Supplementary Provisions to the Law Concerning Partial Revision to the Nippon Telegraph and Telephone Corporation Law (law No. 98 of 1997), NTT is jointly responsible with Nippon Telegraph and Telephone East Corporation, Nippon Telegraph and Telephone West Corporation, and NTT Communications Corporation for corporate bonds issued prior to June 30, 1999, and the total assets of the four companies above have been pledged as general collateral for the said bonds. Note to Non-Consolidated Statements of Income   Research & Development expenses included in operating expenses: Year ended March 31, 2007: 128,814 million yen Year ended March 31, 2008:   134,802 million yen Notes to Non-Consolidated Statements of Changes in Shareholders' Equity and Other Net Assets Matters Pertaining to Treasury stock Type of stock Common stock   Number of shares on March 31, 2007   1,921,540.08 shares   Increase in number of shares during this annual period (Purchase from stock market)   178,698.00 shares   Increase in number of shares during this annual period (Purchase of fractional shares by shareholders requirement)   3,475.80 shares   Decrease in number of shares during this annual period (Resale of fractional shares by shareholders requirement)   1,243.06 shares   Number of shares on March 31, 2008   2,102,470.82 shares Copyright (c) 2008 Nippon telegraph and telephone corporation