US Postal Service 2015 Annual Report Download - page 44

2015 Report on Form 10-K United States Postal Service 42
Restricted Cash
Restricted cash originates from forfeitures or seizures related to consumer fraud or other criminal activity related to the
mail. Restricted cash includes Postal Service cash that not available for general use, or cash that is otherwise awaiting
disposition.
Receivables, net
Receivables are recorded at the amount invoiced, net of allowances. Allowances for potential credit losses are recognized at
each balance sheet date. These estimates are determined based on historical collection experience, trends in customer payment
frequency and judgments about the probable effects on observable data, including present economic conditions and the financial
health of specific customers and market sectors.
Property and Equipment, net
Property and equipment is recorded at cost, which includes the interest on borrowings used to pay for the construction of
major capital additions, less accumulated depreciation. Depreciation expense is recorded using the straight-line method over
the estimated useful lives, which range from 3 to 40 years. Depreciation expense is included within Other operating expenses
in the accompanying Statements of Operations. The costs and accumulated depreciation of assets sold or retired are removed
from balance sheet accounts in the period in which the transaction occurred. General maintenance and repair costs are charged
to expense as incurred. See Note 5 - Property and Equipment, net for additional information.
Software Capitalization
Software costs, including internal website development costs, are capitalized when they meet certain criteria including, most
significantly, when the software is for internal use, whether acquired or internally developed or modified to meet the Postal
Service’s internal needs. Costs to be capitalized include both contracted resources and postal employee labor costs involved
in the development. Interest costs incurred while developing internal-use software are also capitalized. Costs are accumulated
until the software is put into production, at which time amortization of the internal-use software begins for a period not to
exceed 3 years. See Note 5 - Property and Equipment, net for additional information.
Leases
The Postal Service leases over 23,000 real properties. As the lessee, the Postal Service classifies a lease which has substantially
all the risks and rewards of ownership as a capital lease. These leases are capitalized on the commencement date of the lease
at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The discount rate used
to determine the present value is based on the average U.S. Treasury security rates. The property acquired under a financing
lease is depreciated over the lease term. Capital leases are included within Property and equipment, net in the accompanying
Balance Sheets. Other lease arrangements in which substantially all risks and rewards of ownership are retained by the lessor
are classified as operating leases. Rent expense for operating leases is included in Other operating expenses in the accompanying
Statements of Operations on a straight-line basis over the term of the lease.
Impaired Assets
Impairment losses on long-lived assets are recorded when events or circumstances indicate that an asset’s fair value is less
than its carrying value. When such a determination is made, the carrying values of the assets are written down to fair value.
Fair value is determined by independent appraisals for real property. Due to the absence of a market for most types of mailing
equipment, impaired equipment assets are typically assigned a fair value of zero. See Note 5 - Property and Equipment, net
for additional information.
Employees’ Accumulated Leave, net of advances
Employees’ accumulated leave, net represents leave earned as of the balance sheet date and is recorded net of advances.
Employees earn annual leave based on the number of creditable years of service with the Postal 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 current
year. Leave taken by employees before it is earned is considered an advance. Advances were $156 million and $155 million
at September 30, 2015, and 2014, respectively. Employees’ accumulated leave is included under Current Liabilities within
Compensation and benefits and Employees’ accumulated leave, noncurrent in the accompanying Balance Sheets.
Retiree Benefits
Employees are eligible to participate in the federal government pension and retiree health benefits programs. The Postal
Service is required to provide funding for these plans as determined by the Office of Personnel Management (“OPM”), the
administrator of the plans. The Postal Service cannot direct the costs, benefits or funding requirements of the plans. Accordingly,