Federal Express 2000 Annual Report Download - page 23

FedEx
Corp.
21
m arket value. Interest incom e was $15,116,000,
$12,399,000 and $11,283,000 in 2000, 1999 and
1998, respectively.
MARKETABLE SECURITIES. FedEx’s m arketable
securities are available-for-sale securities and are
reported at fair value. Unrealized gains and losses
are reported, net of related deferred income taxes, as
a component of accum ulated other comprehensive
incom e within comm on stockholders’ investment.
SPARE PARTS, SUPPLIES AND FUEL. Spare parts
are stated principally at weighted-average cost;
supplies and fuel are stated principally at standard
cost, which approximates actual cost on a first-in,
first-out basis. Neither m ethod values inventory in
excess of current replacement cost.
GOODWILL. Goodwill is the excess of the pur-
chase price over the fair value of net assets of
businesses acquired. It is am ortized on a straight-
line basis over periods generally ranging from
15 to 40 years. Accum ulated am ortization was
$165,624,000 and $157,106,000 at May 31, 2000 and
1999, respectively.
IMPAIRMEN T OF LON G-LIVED ASSETS. FedEx
reviews long-lived assets for im pairm ent when cir-
cum stances indicate the carrying value of an asset
m ay not be recoverable. If an im pairm ent exists, an
adjustm ent is m ade to write the asset down to its
fair value, and a loss is recorded as the difference
between the carrying value and fair value.
FOREIGN CURREN CY TRANSLATION . Trans-
lation gains and losses of FedEx’s foreign opera-
tions that use local currencies as the functional
currency are accum ulated and reported, net of
related deferred incom e taxes, as a com ponent of
accum ulated other com prehensive income within
com m on stockholders’ investm ent. Transaction
gains and losses that arise from exchange rate fluc-
tuations on transactions denom inated in a cur-
rency other than the local functional currency are
included in the results of operations.
IN COME TAXES. Deferred incom e taxes are pro-
vided for the tax effect of tem porary differences
between the tax basis of assets and liabilities and
their reported amounts in the financial state-
m ents. FedEx uses the liability method to account
for income taxes, which requires deferred taxes to
be recorded at the statutory rate expected to be in
effect when the taxes are paid.
FedEx has not provided for U.S. federal incom e
taxes on its foreign subsidiaries’ earnings deem ed
to be permanently reinvested. Quantification of the
deferred tax liability, if any, associated with perma-
nently reinvested earnings is not practicable.
REVEN UE RECOGN ITION . Revenue is recorded
based on the percentage of service completed at
the balance sheet date.
RECEN T PRONOUN CEMEN TS. Statement of
Financial Accounting Standards (“SFAS”) N o. 133,
“Accounting for Derivative Instrum ents and
Hedging Activities,” was issued in June 1998, was
subsequently amended by SFAS N o.137, and is now
effective for fiscal years beginning after June 15,
2000 (2002 for FedEx). The Statement requires an
entity to recognize all derivatives as either assets
or liabilities in the balance sheet and to measure
those instruments at fair value. The impact of the
adoption of SFAS N o. 133, if any, on earnings, com -
prehensive incom e and financial position will
depend on the amount, tim ing and nature of any
agreements entered into by FedEx. As of May 31,
2000, FedEx has not adopted the provisions of
SFAS N o. 133.
SFAS No. 138, “Accounting for Certain Derivative
Instrum ents and Certain Hedging Activities,” was
issued in June 2000, and amends SFAS N o.133. SFAS
N o. 138 m ust be adopted concurrently with FedEx’s
adoption of SFAS N o. 133. FedEx does not believe
the am endment will affect its implem entation of
SFAS N o. 133.
RECLASSIFICATION S. Certain prior year amounts
have been reclassified to conform to the 2000
presentation.
USE OF ESTIMATES. The preparation of the con-
solidated financial statem ents in conform ity with
generally accepted accounting principles requires
m anagem ent to m ake estim ates and assumptions
that affect the reported amounts of assets and lia-
bilities and disclosure of contingent assets and lia-
bilities at the date of the financial statem ents and
the reported amounts of revenues and expenses
during the reporting period. Actual results could
differ from those estimates.