US Postal Service 2011 Annual Report Download - page 76

Download and view the complete annual report

Please find page 76 of the 2011 US Postal Service annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 103

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103

2011 Report on Form 10-K United States Postal Service - 74 -
INTEREST CAPITALIZATION
Capitalized interest amounts were not material in 2011,
2010 and 2009.
REPAIRS AND MAINTENANCE
Repairs and maintenance are charged to expense as
incurred. This expense amounted to $725 million in 2011,
$676 million in 2010 and $703 million in 2009.
ASSETS HELD FOR SALE
Assets held for sale were immaterial to the total fixed
assets balance in 2011 and 2010.
ASSET RETIREMENT OBLIGATIONS
A liability for the estimated costs of legally binding
obligations to perform asset retirement activities is
included in “Contingent Liabilities and Other” on the
Balance Sheets.
AMORTIZATION OF LEASEHOLD
IMPROVEMENTS
Leasehold improvements are amortized 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 to
be executed.
FOREIGN CURRENCY TRANSLATION
Foreign currency risk exists related to settlements of
receivables and payables with foreign postal
administrations for international mail. The majority of
international accounts are denominated in special drawing
rights (SDRs). The SDR exchange rate fluctuates daily
based on a basket of currencies comprised of the euro,
Japanese yen, British pound sterling and the U.S. dollar.
Changes in the relative value of these currencies will
increase or decrease the value of the settlement accounts
and result in a gain or loss that is included in operating
results. The impact of foreign currency translation on
operating results was immaterial for 2011, 2010, and
2009.
OUTSTANDING POSTAL MONEY ORDERS
Postal money orders are sold at retail locations. A fee is
charged at the time of sale. The fee is recognized as
revenue at the time of sale. A current liability is recorded
for money orders expected to be presented for payment.
REVENUE RECOGNITION/DEFERRED REVENUE-
PREPAID POSTAGE
Deferred Revenue-Prepaid Postage is an estimate of
postage that has been sold but not yet used by
customers. Revenue is recognized only when services
are rendered. Because payments for postage are
collected in advance of services being performed,
revenue is deferred and reflected in the Balance Sheets
as “Deferred Revenue–Prepaid Postage.” Two categories
of postage sales account for the majority of deferred
revenue–prepaid postage: stamp sales and metered
postage.
Stamp sales in 2011 totaled $8.3 billion. Deferred revenue
on stamp sales is estimated using statistical samples of
stamped mail exiting our system across the country. The
estimated stamp usage is subtracted from stamp sales
with the difference representing our obligation to perform
future services. We reduce that obligation by recognizing
a provision for stamps sold that may never be used; either
through loss, damage, or collecting activity, commonly
referred to as the “breakage factor.”
Metered postage is primarily used by businesses.
Accordingly, the deferred revenue for meters is much
smaller as a percentage of annual sales than for stamps,
because business customers generally manage their cash
flow much more closely and purchase postage only as
needed. Deferred revenue related to meters is estimated
by monitoring the actual usage of all postage meters that
had postage added during the month preceding the
financial measurement date. The information from the two
most recent meter readings allows us to derive a deferral
percentage, which is applied to all postage meter receipts
for the month. Metered postage receipts in 2011 subject
to deferral totaled $15.7 billion.
We also include in our estimate of deferred revenue–
prepaid postage, an estimate for mail that is in transit
within the postal system. We do this because the earnings
process is not considered complete until mail is delivered
to the customer.
In Quarter III, 2010, the Postal Service refined the stamp
usage estimation methodology to reflect new information
concerning the breakage factor. This resulted in an
increase of deferred revenue-prepaid postage of $112
million, $103 million of which is attributable to changes
that were not identifiable based on data previously
available.
In Quarter I, 2011, the Postal Service enhanced the
estimation technique employed to estimate deferred
revenue prepaid postage for Forever Stamps. During that
quarter, certain usage data indicated that a refinement of
the estimation process for Forever Stamp usage was
necessary. As a result of this enhancement, deferred
revenue-prepaid postage was increased by $170 million.