US Postal Service 2003 Annual Report Download - page 49

2003 annual report united states postal service | 47
notes to the
financial statements
result in a gain or loss from revaluation reported in the
results from operations. The actual currency used to
settle accounts varies by country.
The loss recorded on the statement of operations from
this revaluation was $9 million in 2003, $7 million in
2002 and $0 in 2001. In addition to the year end reval-
uation, we also recognize gains and losses on our
payables and receivables when we settle with foreign
postal administrations. The impact on the statement of
operations from these settlement losses was $12
million in 2003, $7 million in 2002 and $7 million in
2001.
Supplies, Advances and Prepayments
Supplies, advances and prepayments are primarily
composed of our inventories of supplies, motor
vehicle parts, parts for mail processing equipment
and advances to employees for annual leave. We
value our inventories at the lower of average cost or
current market price. Total inventories amounted to
$123 million at the end of 2003 and $136 million at
the end of 2002.
Property and Equipment
We record property and equipment at what it costs
us to acquire the assets, including the interest we
pay on the money we borrow to pay for the
construction of major capital additions. This interest
amounted to $1 million in 2003, $23 million in
2002 and $50 million in 2001. Repairs and mainte-
nance are charged to expense as incurred. This
expense amounted to $692 million in 2003, $577
million in 2002 and $600 million in 2001.
We depreciate buildings and equipment over their
estimated useful lives, which range from 3 to 75
years, using the straight-line method. We amortize
leasehold improvements over the period of the lease
or the useful life of the improvement, whichever time
is shorter.
Impaired Assets
We record losses on long-lived assets when events
and circumstances indicate that the assets might be
impaired. In accordance with FAS Statement No. 144,
Accounting for the Impairment or Disposal of Long-
Lived Assets,we have written down our impaired
assets to the lower of cost or fair value. No material
impairments were recorded in 2003, 2002 or 2001.
Allowance for Doubtful Accounts
We provide an allowance for doubtful accounts in our
outstanding receivables based on our collection
history and an estimate of uncollectible accounts.
Revenue Recognition/Estimated Prepaid
Postage
We recognize revenue when service is rendered.
Estimated prepaid postage is the amount of cash we
estimate that we collected by the end of the year for
services that we will perform in the following year. In
2002 after extensive analysis, we changed our esti-
mate of the sampling period for meter customers
from 92 days to 30 days to more closely reflect the
meter resetting practices of our customers. The
impact of this change in estimate was a $113 million
reduction of the liability in 2002.
Compensation and Benefits Payable
These are the salaries and benefits we owe to current
and retired employees, including the amounts
employees have earned but have not yet been paid,
current workers’ compensation, unemployment
costs, health benefits and the current portion of the
amounts payable for retirement benefits.
Deferred Retirement Benefits and Costs
We are an independent establishment of the execu-
tive branch of the U.S. government. We provide
pension benefits as defined by OPM and, therefore,
have a parent-subsidiary relationship. We accounted
for our participation in the U.S. government spon-
sored retirement plans as a participant in a
multi-employer plan arrangement in accordance with
FAS 87, Employer’s Accounting For Pension Costs.
See Notes 6 and 7 for additional information.
Post-Retirement Health Benefits
Retiree health benefits costs are those obligations we
pay as a portion of the health insurance premiums of
those retirees and their survivors who participate in the
Federal Employees Health Benefits Program (FEHBP).
We account for our participation in FEHBP as a partic-
ipant in a multi-employer plan arrangement. Therefore,
the costs of retiree health benefits are expensed as we
incur them. See Note 4 for additional information.
Workers’ Compensation Costs
We are self-insured for workers’ compensation costs
under a program administered by the Department of
Labor (DOL). We record these costs, which include
injured employees’ medical expenses and payment
for continuation of wages, as an operating expense.
At the end of the year, our liability represents the
estimated present value of the total amounts we
expect to pay in the future for postal workers injured