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68 | 2009 Annual Report United States Postal Service
NOTE 3 — SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Accounting and Use of Estimates
We conform to accounting principles generally accepted
in the United States (GAAP) and maintain our account-
ing records and prepare fi nancial statements on the ac-
crual basis of accounting. Following these principles, we
make estimates and assumptions that affect the amounts
reported in the Financial Statements and Notes. Actual re-
sults may differ from estimates.
Basis of Presentation
These fi nancial statements refl ect the audited results of
operations of the United States Postal Service for the years
ended September 30, 2009, 2008 and 2007 and our fi -
nancial position as of September 30, 2009 and 2008. All
references to years, unless otherwise stated, refer to our
fi scal year beginning October 1 and ending September 30.
All references to quarters, unless otherwise stated, refer to
quarters within fi scal years 2009 and 2008. We have eval-
uated all subsequent events through November 16, 2009,
the same date that the fi nancial statements were issued.
Segment Information
Although the law divides our services into market-domi-
nant and competitive categories, and we track revenues
by category and mail class, we operate one fully integrated
network. We operate in one segment throughout the Unit-
ed States, its possessions and territories.
Reclassifi cations
Certain comparative prior year amounts related to fi xed
assets and payables that are immaterial to the fi nancial
statements and accompanying notes have been reclas-
sifi ed to conform to the current year presentation. These
reclassifi cations had no effect on previously reported op-
erating income and net income.
Cash and Cash Equivalents
We consider securities that mature within 90 days or less
from the date that we buy them to be cash equivalents.
Included in cash and cash equivalents are funds desig-
nated to be used for law enforcement purposes and con-
sumer awareness for fraud prevention. The amounts des-
ignated at the end of 2009 and 2008 were $126 million
and $122 million, respectively.
Allowance for Doubtful Accounts
We provide an allowance for doubtful accounts on out-
standing receivables based on our collection history and
an estimate of uncollectible accounts.
Allowance for Doubtful Accounts
(dollars in millions)
2009 2008 2007
Beginning Balance $ 41 $ 44 $ 48
Provision for Doubtful Accounts 6 7 12
Writeoffs 18 10 16
Ending Balance $ 29 $ 41 $ 44
Supplies and Repair Parts
Supplies and repair parts consist of repair parts for mail
processing equipment. We value these at average cost.
Total supplies and repair parts were $95 million at the end
of 2009 and $112 million at the end of 2008. A majority of
our motor vehicle spare parts are supplied through con-
signment agreements.
Property and Equipment
We record property and equipment at cost, including inter-
est paid on the money we borrow to pay for the construc-
tion of major capital additions. See Note 7, Property and
Equipment, in the Notes to the Financial Statements, for
additional information.
We depreciate buildings and equipment over their esti-
mated useful lives, which range from 3 to 40 years, except
buildings with historic status, which are depreciated over
75 years, using the straight-line method.
Deferred Gains on Sales of Property
We account for deferred gains on sales of property under
the provisions of ASC 360 (formerly FAS 66, Accounting
for Sales of Real Estate). These gains will be recognized
and the assets will be removed from our accounting re-
cords once the leases and other continuing involvement in
the properties have expired.
The total amount of deferred gains recognized in income
was $11 million in 2009, $44 million in 2008 and was im-
material in 2007.
Impaired Assets
We record losses on long-lived assets when events or cir-
cumstances indicate that the assets might be impaired. To
meet our universal service requirement, we maintain real
estate and certain other assets that are not fully utilized. As