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2009 Annual Report United States Postal Service | 69
a result, we do not consider assets impaired solely based
on volume of activity. Assets are evaluated for impairment
when no longer required to provide mailing services. In
accordance with ASC 360 (formerly FAS 144, Account-
ing for the Impairment or Disposal of Long-Lived Assets),
we write down impaired assets to the lower of cost or fair
value. If an asset is deemed impaired, fair value is deter-
mined by comparison to appraisals for real property. Due
to the absence of a market for most types of equipment,
impaired equipment assets are assigned a fair value of
zero. See Note 7, Property and Equipment, in the Notes to
the Financial Statements, for additional information.
Asset Retirement Obligations
We account for asset retirement obligations in accordance
with ASC 410 (formerly Financial Accounting Standards
Board Interpretation 47, Accounting for Conditional Asset
Retirement Obligations). We accrue a liability for the esti-
mated costs of a future legal obligation to perform a retire-
ment activity on a certain population of our existing assets.
Accruals are recorded under “Noncurrent Liabilities, Con-
tingent liabilities and other” on our balance sheets.
Amortization of Leasehold Improvements
We amortize leasehold improvements over the period of
the lease or the useful life of the improvement, whichever
is shorter.
Leasehold improvements that are placed in service after
the start of the lease term are amortized over the shorter
of the useful life of the asset or the remaining lease term,
including renewal options that are reasonably assured.
Foreign Currency Translation
We have foreign currency risk related to settlements with
foreign postal administrations for international mail. The
majority of our international accounts are denominated
in special drawing rights (SDRs). The SDR exchange rate
fl uctuates daily based on a basket of currencies comprised
of the euro, Japanese yen, pound sterling, and the U.S.
dollar. Changes in the relative value of these currencies will
increase or decrease the value of our settlement accounts
and result in a gain or loss from revaluation that is reported
in the results from operations. The actual currency used to
settle accounts varies by country. The impacts on our fi -
nancial statements from foreign currency fl uctuations were
insignifi cant for 2009, 2008 and 2007.
Outstanding Postal Money Orders
We sell money orders to the general public at our retail
locations. We charge a fee to the customer at the time of
sale. The fee is recognized as revenue at the time of sale.
We recognize a liability for money orders we expect to be
presented for payment.
Revenue Recognition/Deferred Revenue-
Prepaid Postage
We recognize revenue when services are rendered. Be-
cause we collect payment in advance of services being
performed, we defer the revenue until the services are per-
formed. This is classifi ed as a liability, Deferred revenue-
prepaid postage, on our balance sheets. In Quarter III of
2008, we changed our methodology used to estimate the
deferred revenue for prepaid postage for stamps. We fur-
ther refi ned this methodology in Quarter IV of 2009 to re-
fl ect additional information in customer usage patterns of
both Forever and denominated stamps demonstrated by
newly available data.
Both updates were made necessary because the intro-
duction of the Forever Stamp in April 2007, combined
with the May 2008 price increase, resulted in a change in
consumer behavior regarding the purchase and usage of
stamps that was not directly measurable using the prior es-
timation techniques. In 2008, we enhanced our approach
that more accurately captured trends in stamp usage. In
2009, based on newly available data, we refi ned this es-
timation model to allow us to better estimate consumer
behavior patterns for the purchase and use of stamps. The
2008 change to an enhanced estimation technique and
the 2009 refi nement are both considered to be changes in
accounting estimate under GAAP.
As required by ASC 250 (formerly FAS 154, Accounting
Changes and Error Corrections), the impacts of the chang-
es were recorded in the Quarter which the estimations
were made: Quarter IV of 2009 and Quarter III of 2008.
For the year ended September 30, 2009, we increased the
stamp portion of the deferred revenue-prepaid postage li-
ability by $846 million, $655 million of which is considered
a change in estimate that is attributable to changes in con-
sumer behavior that were not identifi able based on data
available previously.
For the year ended September 30, 2008, we increased the
stamp portion of the deferred revenue-prepaid postage li-
ability by $477 million, $230 million of which is considered
a cumulative change in estimate and $247 million of which
is attributable to changes in consumer behavior during the
last two quarters of the year.