US Postal Service 2011 Annual Report Download - page 77

2011 Report on Form 10-K United States Postal Service - 75 -
These changes are both considered changes in
accounting estimates under GAAP and, accordingly, the
impact of the changes was reflected in the quarter that the
estimate changes were made.
The chart below details our deferred revenue-prepaid
postage by service category.
Deferred Revenue-Prepaid Postage
( Dollars in millions) 2011 2010
Forever Stamps 2,527 1,323
Non-Forever Stamps 246 488
Meters
459
506
Mail-In-Transit 247 254
18 13
Total Deferred Revenue-Prepaid Postage 3,497 2,584
Other, primarily precancelled stamps
ADVERTISING EXPENSES
Advertising costs are expensed as incurred and are
included in other operating expenses. Advertising
expenses were $147 million in 2011 and 2010, and $105
million in 2009.
COMPENSATION AND BENEFITS
Compensation and benefits payable consists of the
salaries and benefits owed to current and former
employees, including the amounts employees have
earned but have not yet been paid, unemployment, and
health benefit costs.
CONTINGENT LIABILITIES
The Postal Service is involved in various legal
proceedings and contingencies. A liability is recorded
based on our estimate of the probable cost of the
resolution of a contingency. The actual resolution of these
contingencies may differ from our estimates. If a
contingency is settled for an amount greater than the
estimate, a future charge to income would result.
Likewise, if a contingency is settled for an amount that is
less than the estimate, a future credit to income would
result.
The events that may impact contingent liabilities are often
unique and generally are not predictable. At the time a
contingency is identified, all relevant facts are considered
as part of our evaluation. A liability is recorded for a loss
when the loss is probable of occurring and reasonably
estimable. Events may arise that were not anticipated and
the outcome of a contingency may result in a loss to the
Postal Service that differs from the previously estimated
liability. These factors could result in a material difference
between estimated and actual operating results. See Note
6, Contingent Liabilities for additional information.
RETIREE BENEFITS
Employees are eligible to participate in the federal
government sponsored pension and retiree health
benefits programs. The Postal Service is required to
provide funding for these plans as determined by the
administrator of the plans, the OPM. The Postal Service
cannot direct the costs, benefits, or funding requirements
of the plans. Accordingly, the plans are accounted for
using multiemployer plan accounting rules and expense is
recorded in the period the contribution is due and
payable. These amounts can fluctuate significantly from
year to year if changes in funding requirements are made.
See Note 7, Health Benefit Programs, and Note 8,
Retirement Programs, for additional information.
WORKERS’ COMPENSATION
Workers’ compensation expenses are incurred under a
program administered by the DOL and include
employees’ medical expenses, compensation for wages
lost, and DOL administrative fees. See Note 9, Workers’
Compensation, for additional information.
EMPLOYEES’ ACCUMULATED LEAVE
Employees earn annual leave based on their number of
creditable years of service. The Postal Service advances
annual leave to employees at the beginning of each
calendar year for the value of leave they will earn for the
year. Leave taken by employees before it is earned is
considered an advance. Employees’ accumulated leave
represents leave earned as of the balance sheet date and
is recorded net of advances.
REVENUE FORGONE APPROPRIATION
Revenue forgone is an appropriation from Congress
which covers the cost of providing mailing services to
certain groups at no cost or at reduced rates. The costs
incurred for this service are estimated by the Postal
Service and submitted to Congress annually. Congress
subsequently approves or alters the amount and funds
the necessary appropriation. See Note 11, Revenue
Forgone, for additional information.
EMERGENCY PREPAREDNESS APPROPRIATION
Emergency preparedness appropriations were received
from Congress to help pay the costs of keeping the mail,
postal employees and postal customers safe, and are
restricted for such use. These funds were accounted for
as deferred revenue upon receipt and were generally
utilized to procure capital equipment. Revenue for
emergency preparedness appropriations is recognized
when depreciation expense for the purchased equipment
is recorded. The emergency preparedness appropriations
revenue recognized during the years ended September
30, 2011, and 2010 was $63 million, and for the year
ended September 30, 2009, was $64 million.