US Postal Service 2014 Annual Report Download - page 54

2014 Report on Form 10-K United States Postal Service 50
Deferred revenue at September 30, 2014 and 2013 related to emergency preparedness appropriations was $93 million and $184
million, respectively. Deferred revenue from appropriations is included on the Balance Sheets in “Other current liabilities” and
“Other noncurrent liabilities.”
Advertising
Advertising costs are expensed as incurred and are included in “Other operating expenses” in the Statements of Operations.
Advertising expenses were $175 million, $140 million and $125 million for the years ended September 30, 2014, 2013 and
2012, respectively.
Foreign Currency Translation
Foreign currency translation risk can arise from international mail transactions related to settlements of receivables and payables
with foreign postal administrations. The majority of international accounts are denominated in special drawing rights (“SDRs”).
SDRs exchange rate fluctuates daily based on a group 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 not material for the years ended September 30, 2014, 2013 and 2012.
Segment Information
The Postal Service operates as one segment throughout the U.S., its possessions and territories.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year’s presentation. Specifically, certain revenue
have been reclassified from “Operating revenue” to “Other revenue” on the Statements of Operations. These reclassifications
had no effect on previously reported total revenue, operating loss or net loss.
Related Parties
The Postal Service has significant transactions with other U.S. government agencies, as disclosed throughout this report. For
the years ended September 30, 2014, 2013 and 2012, revenue from other U.S. Government agencies was $771 million, $777
million and $852 million, respectively, and is included in “Operating revenue” in the Statements of Operations. Expenses
incurred for transactions with other U.S. Government agencies are included in “Operating expenses,” in the Statements of
Operations.
Recent Accounting Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09 “Revenue
from Contracts with Customers” (“ASU 2014-09”). The new standard outlines a single comprehensive model for entities to use
in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance,
including industry-specific guidance. ASU 2014-09 is effective for fiscal years and interim periods within those years,
beginning after December 15, 2016. Early adoption is not permitted. Management is currently evaluating the impact of adoption
of this standard on the financial statements which is not known or reasonably estimable at this time.
In August 2014, the FASB issued Accounting Standards Update 2014-15 “Disclosure of Uncertainties About an Entity’s Ability
to Continue as a Going Concern” (“ASU 2014-15”). The new standard requires management to perform interim and annual
assessments of an entity’s ability to continue to meet its obligations as they become due within one year after the date that the
financial statements are issued. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim
periods thereafter, with early adoption permitted. Management does not believe the adoption of the new standard will have a
significant impact on its operations.
Note 2- Liquidity
The Postal Service continues to suffer from a lack of liquidity. Cash balances remain insufficient to support an organization with
approximately $73 billion in annual operating expenses as the present cash balance can fund less than one month of operating
activity and was insufficient to cover the legally required retiree health benefits prefunding payment of $5.7 billion that was due
by September 30, 2014. The Postal Service held cash and cash equivalents of $4.9 billion and $2.3 billion as of September 30,
2014 and 2013, respectively, and had no remaining borrowing capacity. See Note 6- Debt for additional information.