US Postal Service 2012 Annual Report Download - page 87

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2012 Report on Form 10-K United States Postal Service- 86 -
both houses of Congress and a bill has been passed by the Senate. If no bill is passed in the current
session of Congress, then the legislative process starts anew with new bills required to be introduced when
the 113th Congress begins in January 2013. Given the vital role that the Postal Service plays in the U.S.
economy, management is requesting that Congress promptly take the steps needed to enact legislative
changes that will enable the Postal Service to return to financial stability.
A vital component of the five-year plan is the proposal that the Postal Service sponsor its own health care
program independent of other federal health insurance programs. A Postal Service-sponsored health care
program could achieve over $7 billion of projected annual savings. The plan would allow for the elimination
of the retiree health benefit prefunding obligation established in the Postal Service Accountability and
Enhancement Act of 2006, which would save the Postal Service over $5 billion dollars annually through
2016. The plan also proposes to transfer current retirees into the Postal Service-sponsored health care
program, an action that requires legislation. The Postal Service’s plan is expected to be more cost effective,
is forecasted to reduce health care costs significantly, and will result in equivalent or better coverage for the
vast majority of retirees and current employees.
MITIGATING CIRCUMSTANCES
The United States Postal Service’s status as an independent establishment of the executive branch that
does not receive tax dollars for its operations presents unique requirements and restrictions, but also
potentially mitigates some of the financial risk that would otherwise be associated with a cash shortfall. The
Postal Service is widely recognized as the provider of an essential government service and is the epicenter
of an almost $1 trillion mailing industry. There are potential legislative remedies that could resolve the short-
term liquidity concerns. Therefore, it is unlikely that, in the event of a cash shortfall, the Federal Government
would cause or allow it to significantly curtail or cease operations.
The Postal Service continues to inform the Administration, Congress, the Postal Regulatory Commission
(PRC), and other stakeholders of the immediate and longer-term financial issues it faces and the legislative
changes that would help provide financial stability. Given the vital role the Postal Service plays in the U.S.
economy, it is hopeful that Congress will promptly enact, and the President will sign, legislation which will
mitigate the Postal Service’s short-term financial challenges and provide it with the authority to make
needed changes to ensure long-term financial stability. However, there can be no assurances that the
requests to restructure the PSRHBF prefunding payment schedule, or any other legislative changes, will be
made in time to impact 2013, or at all.
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING AND USE OF ESTIMATES
The Postal Service conforms to accounting principles generally accepted in the United States (GAAP) and
maintains its accounting records and prepares its financial statements on the accrual basis of accounting.
Following these principles, estimates and assumptions are made that affect the amounts reported in the
Financial Statements and disclosed in the Notes to the Financial Statements. Actual results may differ from
those estimates.
These financial statements reflect the audited results of operations of the United States Postal Service for
the years ended September 30, 2012, 2011, and 2010 and its financial position as of September 30, 2012
and 2011. All references to years, unless otherwise stated, refer to the fiscal year beginning October 1 and
ending September 30. All references to quarters, unless otherwise stated, refer to quarters within fiscal
years 2012, 2011, and 2010. Subsequent events through November 15, 2012, the date that the financial
statements were issued, have been evaluated.
SEGMENT INFORMATION
The Postal Service operates in one segment throughout the United States, its possessions and territories.