Net deferred tax assets were included in the consolidated balance sheets as follows: Yen U.S. Dollars (millions) (thousands) At March 31 2003 2004 2004 Other current assets · 115,900 · 103,449 $ 975,934 Other investments and long-term loans-Others 233,269 89,868 847,811 Other current liabilities (82) (6,448) (60,830) Other long-term liabilities (12,523) (6,602) (62,283) Net deferred tax assets · 336,564 · 180,267 $ 1,700,632 The Company and the wholly owned subsidiaries in Japan have adopted the consolidated tax return system of Japan effective for and after the year ended March 31, 2003. The tax loss carryforwards expire at various dates, but extend up to 7 years in Japan and primarily 20 years outside Japan. Realization depends on the abilities of the companies to generate sufficient taxable income prior to the expiration of the tax loss carryforwards. Deferred tax assets have been recorded for the loss carryforwards except for those that are unlikely to be realized. Deferred tax liabilities have not been provided on the undistributed profit of affiliates, as it is deemed that any distributions will not give rise to tax liabilities. Deferred tax assets have not been provided for losses of subsidiaries except for those expected to be realized. The changes in the number of issued shares of common stock for the years ended March 31, 2002, 2003 and 2004 were as follows: An increase as a result of stock exchange for the year ended March 31, 2002 reflected the issuance of shares by which the Company turned Fujitsu Systems Construction Ltd. into a wholly owned subsidiary. Number of shares 2002 2003 2004 Balance at beginning of year 1,977,227,929 2,001,962,672 2,001,962,672 Conversion of convertible bonds 19,452,895 GLYPH<209> — Increase as a result of stock exchange 5,281,848 GLYPH<209> — Balance at end of year 2,001,962,672 2,001,962,672 2,001,962,672 12. Shareholders’ Equity 13. Commitments and Contingent Liabilities Commitments outstanding at March 31, 2004 for purchases of property, plant and equipment were approximately ·940 million ($8,868 thousand). Contingent liabilities for guarantee contracts amounted to ·50, 028 million ($471,962 thousand) at March 31, 2004. Of the total contingent liabilities, guarantees given for loans by FASL LLC (the company name was altered to Spansion LLC at June 28, 2004) group were ·26,162 million ($246,811 thousand ) and for employees’ housing loans were ·12,508 million ($118,000 thousand). The Group enters into derivative transactions related to foreign currency exchange rates and interest rates in order to reduce their risk exposure arising from fluctuations in these rates, to reduce the cost of the funds financed, and to improve their return on invested funds. The Group basically enters into derivative transactions only to cover their actual requirements for the effective management of receivables/liabilities, and not for speculative or dealing purposes.  The Group, in principle, has no intention to use derivative financial instruments that would increase market risks. Furthermore, the counterparties to the derivative transactions are thoroughly assessed in terms of their credit risks. Therefore, the Group believes that their derivative financial instruments entail minimal market and credit risks. The Group enters into derivative transactions based on regulations established by the Company, and controls the risk of the transaction by assessing the efficiency of their hedging. The Group has adopted hedge accounting for its derivative transactions. Gains or losses on changes in the fair market values of the hedging instruments which consist of forward exchange, option and swap contracts and related complex contracts are recognized in income when the relating hedged items are reflected in income. 14. Derivative Financial Instruments Purpose of Derivative Trading Basic Policies for Derivative Trading Control of Derivative Trading Hedge Accounting 49