UPS 2010 Annual Report Download - page 84

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Based on interest rates for financial instruments with similar terms and maturities, the estimated fair value
of finance receivables is approximately $491 and $623 million as of December 31, 2010 and 2009, respectively.
At December 31, 2010, we had unfunded loan commitments totaling $602 million, consisting of standby letters
of credit of $93 million and other unfunded lending commitments of $509 million.
During 2009, impaired finance receivables with a carrying amount of $13 million were written down to a
net fair value of $8 million, based on the fair value for the related collateral which was determined using
unobservable inputs (Level 3).
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31 consists of the following (in millions):
2010 2009
Vehicles ....................................................... $ 5,519 $ 5,480
Aircraft (including aircraft under capitalized leases) ..................... 14,063 13,777
Land .......................................................... 1,081 1,079
Buildings ....................................................... 3,102 3,076
Building and leasehold improvements ................................ 2,860 2,800
Plant equipment ................................................. 6,656 6,371
Technology equipment ............................................ 1,552 1,591
Equipment under operating leases ................................... 122 145
Construction-in-progress .......................................... 265 488
35,220 34,807
Less: Accumulated depreciation and amortization ....................... (17,833) (16,828)
$ 17,387 $ 17,979
We continually monitor our aircraft fleet utilization in light of current and projected volume levels, aircraft
fuel prices, and other factors. In 2008, we announced that we were in negotiations with DHL to provide air
transportation services for all of DHL’s express, deferred and international package volume within the United
States, as well as air transportation services between the United States, Canada and Mexico. In early April 2009,
UPS and DHL mutually agreed to terminate further discussions on providing these services. Additionally, our
U.S. Domestic Package air delivery volume had declined for several quarters as a result of persistent economic
weakness and shifts in product mix from our premium air services to our lower cost ground services. As a result
of these factors, the utilization of certain aircraft fleet types had declined and was expected to be lower in the
future.
Based on the factors noted above, as well as FAA aging aircraft directives that would require significant
future maintenance expenditures, we determined that a triggering event had occurred that required an impairment
assessment of our McDonnell-Douglas DC-8-71 and DC-8-73 aircraft fleets. We conducted an impairment
analysis as of March 31, 2009, and determined that the carrying amount of these fleets was not recoverable due to
the accelerated expected retirement dates of the aircraft. Based on anticipated residual values for the airframes,
engines, and parts, we recognized an impairment charge of $181 million in the first quarter of 2009. This charge
is included in the caption “Other expenses” in the statement of consolidated income, and impacted our U.S.
Domestic Package segment. The DC-8 fleets were subsequently retired from service. We currently continue to
utilize and operate all of our other aircraft fleets.
The impaired airframes, engines, and parts had a net carrying value of $192 million, and were written down
to an aggregate fair value of $11 million. The fair values for the impaired airframes, engines, and parts were
determined using unobservable inputs (Level 3).
72