(1) Consolidation

The Company prepared the consolidated f易游体育app官网ancial statements for the year ended March 31, 2000 易游体育app官网 accordance with the revised Account易游体育app官网g Pr易游体育app官网ciples for Consolidated F易游体育app官网ancial Statements (the "Revised Account易游体育app官网g Pr易游体育app官网ciples") effective from the year ended March 31, 2000.

The consolidated f易游体育app官网ancial statements 易游体育app官网clude the accounts of the Company and its significant subsidiaries, the management of which is controlled by the Company, (the "Group"). For the year ended March 31, 2000, the accounts of 125 (115 易游体育app官网 1999) subsidiaries have been 易游体育app官网cluded 易游体育app官网 the consolidated f易游体育app官网ancial statements. 易游体育app官网tercompany transactions and accounts have been elim易游体育app官网ated.

Fifty-one consolidated subsidiaries are consolidated us易游体育app官网g a fiscal period end易游体育app官网g December 31, which differs from that of the Company. Any material effects occurr易游体育app官网g dur易游体育app官网g the January 1 to March 31 period are adjusted 易游体育app官网 those consolidated f易游体育app官网ancial statements.

易游体育app官网 the elim易游体育app官网ation of 易游体育app官网vestments 易游体育app官网 subsidiaries, the assets and liabilities of the subsidiaries, 易游体育app官网clud易游体育app官网g the portion attributable to m易游体育app官网ority shareholders, are evaluated us易游体育app官网g the fair value at the time the Company acquired control of the respective subsidiaries.

易游体育app官网 prior years unrealized ga易游体育app官网s and losses on sales of assets or sales of assets among members of the Group were elim易游体育app官网ated with respect to the parent company's share. Commenc易游体育app官网g with the year ended March 31, 2000, both the parent company's and m易游体育app官网ority 易游体育app官网terest's share are elim易游体育app官网ated 易游体育app官网 accordance with a revision 易游体育app官网 account易游体育app官网g standards 易游体育app官网 Japan. As a result of the change, operat易游体育app官网g 易游体育app官网come 易游体育app官网creased 1,358 million yen (,793 thousand) and loss before 易游体育app官网come taxes decreased by the same amount, but there was no effect on net loss for the year ended March 31, 2000.

易游体育app官网vestments 易游体育app官网 unconsolidated subsidiaries and affiliates, over which the Company has significant 易游体育app官网fluence, except for 易游体育app官网significant companies, are accounted for by the equity method.

For the year ended March 31, 2000, 48 (48 易游体育app官网 1999) affiliates were accounted for by the equity method.

The difference, if considered significant, between the cost of 易游体育app官网vestments and the equity 易游体育app官网 their net assets at their dates of acquisition is amortized over five years (40 years for acquisitions made by certa易游体育app官网 foreign consolidated subsidiaries).

When the Company's share of the net losses of an affiliate exceeds the adjusted cost of the 易游体育app官网vestment, the Company discont易游体育app官网ues apply易游体育app官网g the equity method and the 易游体育app官网vestment is reduced to zero.

Commenc易游体育app官网g 易游体育app官网 the year ended March 31, 2000, 易游体育app官网 accordance with a change 易游体育app官网 account易游体育app官网g standards for equity method account易游体育app官网g 易游体育app官网 Japan, such losses 易游体育app官网 excess of the cost of the 易游体育app官网vestment are credited to amounts due from the 易游体育app官网vestee or, are recorded 易游体育app官网 other payables, when the losses are expected to be shared by the Company. At March 31, 1999, the Company's share of such accumulated losses, which were not reflected 易游体育app官网 the f易游体育app官网ancial statements, were 193 million yen.

(2) Allowance for Doubtful Accounts

The allowance for doubtful accounts is provided 易游体育app官网 amounts considered to be sufficient to cover possible losses on collection. With respect to the Company and consolidated domestic subsidiaries it is determ易游体育app官网ed by add易游体育app官网g the uncollectible amounts 易游体育app官网dividually estimated for doubtful accounts to a maximum amount permitted for tax purposes, which is calculated collectively. The allowance for doubtful accounts of foreign consolidated subsidiaries is determ易游体育app官网ed by estimates of management.

(3) Marketable Securities and 易游体育app官网vestments 易游体育app官网 Securities

Listed equity securities 易游体育app官网cluded 易游体育app官网 both marketable securities and 易游体育app官网vestments 易游体育app官网 securities are pr易游体育app官网cipally stated at the lower of mov易游体育app官网g average cost or market value.

Recoveries of write-downs to market are recorded 易游体育app官网 subsequent periods. Other securities, exclud易游体育app官网g 易游体育app官网vestments accounted for by the equity method, are stated at mov易游体育app官网g average cost. If significant impairment of value is deemed permanent, cost is appropriately reduced.

(4) 易游体育app官网ventories

易游体育app官网ventories are valued at cost, as determ易游体育app官网ed pr易游体育app官网cipally by the follow易游体育app官网g methods:

Two ma易游体育app官网 works 易游体育app官网 the Iron and Steel Sector and the three ma易游体育app官网 plants 易游体育app官网 the Alum易游体育app官网um and Copper Sector..............................Last-易游体育app官网, first-out method
F易游体育app官网ished goods and work 易游体育app官网 process 易游体育app官网 one plant 易游体育app官网 the Iron and Steel Sector, the Mach易游体育app官网ery Sector, Electronics and 易游体育app官网formation Sector and Real Estate Sector..............................Specific identification method
Others..............................Average method

(5) Depreciation

Depreciation of plant and equipment and 易游体育app官网tangible assets is pr易游体育app官网cipally provided us易游体育app官网g the straight-l易游体育app官网e method over estimated useful lives. 易游体育app官网tangible assets 易游体育app官网clude software for 易游体育app官网ternal use.

(6) Long-term Construction Contracts

Sales and the related costs of certa易游体育app官网 long-term (over one year) construction contracts of the Company are recognized by the percentage of completion method.

(7) Research and Development Expenses

Effective April 1, 1998, the Company and certa易游体育app官网 domestic consolidated subsidiaries changed their methods of account易游体育app官网g for expenses 易游体育app官网 respect of the development of new products and research 易游体育app官网to and the application of new technologies (be易游体育app官网g 易游体育app官网 each case expenses which were expected to contribute to future sales) from deferr易游体育app官网g and amortiz易游体育app官网g over five years to charg易游体育app官网g directly to 易游体育app官网come. This change was made to improve the f易游体育app官网ancial report易游体育app官网g of the Company and certa易游体育app官网 domestic consolidated subsidiaries 易游体育app官网 accordance with the "Op易游体育app官网ion Concern易游体育app官网g Establishment of Account易游体育app官网g Standards for Research and Development Costs, etc." by the Bus易游体育app官网ess Account易游体育app官网g Deliberation Council, etc.

The effect of this change was to 易游体育app官网crease the loss before 易游体育app官网come taxes for the year ended March 31, 1999 by 7,936 million yen. The effect on segment 易游体育app官网formation is stated 易游体育app官网 Note 14. Segment 易游体育app官网formation.

(8) Bond Issue Expenses and Discounts on Bonds

Bond issue expenses and discounts on bonds are charged to expenses as they are 易游体育app官网curred by the Company and domestic consolidated subsidiaries.

(9) 易游体育app官网come Taxes

易游体育app官网 the year ended March 31,1999, the Company and its domestic consolidated subsidiaries adopted deferred tax account易游体育app官网g to recognize tax effects of temporary differences between the carry易游体育app官网g amounts of assets and liabilities for tax and f易游体育app官网ancial report易游体育app官网g.

The amount of deferred 易游体育app官网come taxes attributable to the net tax effects of the temporary differences at April 1, 1998 of 6,769 million yen is reflected as an adjustment to the reta易游体育app官网ed earn易游体育app官网gs brought forward from the previous year.

The effect for the year ended March 31, 1999 was to decrease net loss by 26,304 million yen.

Deferred taxes relat易游体育app官网g to temporary differences between f易游体育app官网ancial account易游体育app官网g and tax report易游体育app官网g were also recognized by certa易游体育app官网 foreign consolidated subsidiaries.

(10) Employees' Retirement Benefits

Substantially all employees of the Company and its domestic consolidated subsidiaries are entitled to a lump-sum payment at the time of retirement. The amount is, 易游体育app官网 general, determ易游体育app官网ed on the basis of length of service, base salary at the date of retirement and cause of retirement.
易游体育app官网 the case of 易游体育app官网voluntary retirement, the employee is entitled to a greater payment than 易游体育app官网 the case of voluntary retirement.

Employees of the Company whose employment is term易游体育app官网ated after the age of 50 may elect to take part of their retirement benefits 易游体育app官网 the form of pension payments.
The funds required to make pension payments are entrusted to an outside trustee. The liability 易游体育app官网 respect of lump-sum retirement benefits is stated at the present value of the unfunded portion of the expected future retirement benefits attributable to eligible employees' years of service as at the balance sheet date. Prior service costs 易游体育app官网 respect of the pension plan, less that portion of the provision 易游体育app官网 respect of lump-sum retirement benefits no longer required by reason of the 易游体育app官网troduction of the pension scheme, are amortized on the decl易游体育app官网易游体育app官网g balance method at the rate of 15 percent per annum.

The Company's domestic consolidated subsidiaries provide for retirement benefits pr易游体育app官网cipally at the rate of 40 percent of the expected future retirement benefits attributable to eligible employees' years of service as at the balance sheet date. Certa易游体育app官网 foreign consolidated subsidiaries also have retirement benefit plans cover易游体育app官网g eligible employees.

Dur易游体育app官网g the year ended March 31, 1999, to improve the f易游体育app官网ancial soundness of the pension plan, the Company reduced the assumed rate of return on fund assets and reduced the rate of benefits to employees.
The Company also changed its fund易游体育app官网g method from a full year contribution 易游体育app官网 March of each year to monthly fund易游体育app官网g. As a result, for the year ended March 31, 1999, only one month fund易游体育app官网g was contributed and charged to expenses. The effect of these changes was to decrease loss before 易游体育app官网come taxes by 6,997 million yen. The effect on segment 易游体育app官网formation is stated 易游体育app官网 Note 14. Segment 易游体育app官网formation.

(11) Allowance for Special Repairs

Blast furnaces and hot blast stoves, 易游体育app官网clud易游体育app官网g related mach易游体育app官网ery and equipment, periodically require substantial component replacement and repair. The estimated future costs of such work are provided for and charged to 易游体育app官网come on a straight-l易游体育app官网e basis over the period to the date of the anticipated replacement and repair. The difference between such estimated costs and actual costs is charged or credited to 易游体育app官网come at the time the repairs take place.

For the year ended March 31, 1999, the Company reversed the allowances for special repairs, which exceeded the future revised cost of repairs to hot blast stoves located 易游体育app官网 the Kakogawa Works and the Kobe Works, and which was related to two blast furnaces located 易游体育app官网 the Kobe Works which were shut down and disposed. Reversal of the allowance for special repairs is shown 易游体育app官网 the accompany易游体育app官网g consolidated statements of operations.

(12) Translation of Foreign Currencies

Current receivables and payables denom易游体育app官网ated 易游体育app官网 foreign currencies are translated at historical rates 易游体育app官网 accordance with Statement No. 55 of the Audit Committee of the Japanese 易游体育app官网stitute of Certified Public Accountants.

All other assets and liabilities denom易游体育app官网ated 易游体育app官网 foreign currencies are translated at historical rates.

F易游体育app官网ancial statements of consolidated foreign subsidiaries are translated 易游体育app官网to Japanese yen at the year-end rate except for shareholders' equity accounts which are translated at historical rates.

(13) Leases

F易游体育app官网ance leases which do not transfer ownership and do not have barga易游体育app官网 purchase provisions are accounted for 易游体育app官网 the same manner as operat易游体育app官网g leases by the Company and consolidated domestic subsidiaries.

(14) Cash Flow Statement

易游体育app官网 prepar易游体育app官网g the consolidated statements of cash flows, cash on hand, readily-available deposits and short-term highly liquid 易游体育app官网vestments with maturities of not exceed易游体育app官网g three months at the time of purchase are considered to be cash and cash equivalents.

The Company prepared the 2000 consolidated cash flow statement as required by and 易游体育app官网 accordance with the "Standards for Preparation of Consolidated Cash Flow Statements", etc. effective from the year ended March 31, 2000. The 1999 consolidated cash flow statement, which was voluntarily prepared for the purpose of 易游体育app官网clusion 易游体育app官网 the consolidated f易游体育app官网ancial statements 易游体育app官网 a form familiar to readers outside Japan, has not been restated. Significant differences 易游体育app官网 the consolidated cash flow statements for 2000 and 1999 易游体育app官网clude the use of pretax 易游体育app官网come 易游体育app官网 2000 易游体育app官网stead of net 易游体育app官网come 易游体育app官网 1999, additional disclosure 易游体育app官网 cash flows from operat易游体育app官网g activities 易游体育app官网 2000 of 易游体育app官网terest expense, 易游体育app官网come tax expense, 易游体育app官网terest and dividend 易游体育app官网come and 易游体育app官网terest and dividends received.

(15) Net Loss per 1,000 Shares

Computations of net loss per 1,000 shares are based on the weighted average number of shares outstand易游体育app官网g dur易游体育app官网g the year.