US Postal Service 2015 Annual Report Download - page 45

2015 Report on Form 10-K United States Postal Service 43
the plans are accounted for using multiemployer plan accounting rules, and expense is recorded in the period in which the
contribution is due and payable. These amounts can fluctuate significantly from year to year if funding requirements change.
See Note 9 - Retirement Plans and Note 10 - Health Benefits Plans for additional information.
Workers’ Compensation
Postal Service employees are covered by the Federal Employees’ Compensation Act (“FECA”), administered by the
Department of Labor (“DOL”) Office of Workers’ Compensation Programs (“OWCP”). The Postal Service uses an estimation
model to forecast and record workers’ compensation expense for the present value of estimated future payments. See Note 11
- Workers' Compensation for additional information.
Deferred Revenue–Prepaid Postage
Deferred revenue–prepaid postage is an estimate of postage that the Postal Service has sold but customers have not yet used.
Revenue is recognized when mail is delivered. Because payments for postage are collected in advance of services being
performed, revenue is deferred and reflected as Deferred revenue–prepaid postage in the accompanying Balance Sheets.
Stamp sales and metered postage account for the majority of deferred revenue–prepaid postage. Included in the estimate of
deferred revenue-prepaid postage is an estimate for mail that is in-transit within the Postal Service network. See Note 6 -
Payables, Accrued Expenses and Deferred Revenue for additional information.
Contingent Liabilities
The Postal Service is a party to various legal proceedings and claims in the normal conduct of its operations. Contingent
liabilities require significant judgment in estimating potential losses for legal and other claims. Each quarter, significant new
claims and litigation are evaluated for the probability of an adverse outcome. Any prior claims and litigation are also reviewed,
and when necessary, the liability balance is adjusted for resolutions or revisions to prior estimates. Estimates of loss can
therefore change as additional information becomes available. See Note 8 - Commitments and Contingencies for additional
information.
Revenue Forgone
Under the Revenue Forgone Reform Act of 1993, Congress agreed to reimburse the Postal Service $1.2 billion in 42 annual
“installments” of $29 million through 2035 for certain services the Postal Service performed during years 1991 through 1998.
Additionally, each year the Postal Service estimates the costs it incurs to provide “free and reduced mail” services to groups
of mailers that Congress has determined should be subsidized, and the Postal Service submits these estimates annually to
Congress. Congress then considers this for funding, which may be modified and approved or denied, under an appropriation
for both of these components of revenue forgone. See Note 12 - Revenue Forgone for additional information.
Emergency Preparedness Plan
As a result of an act of biological terrorism, Congress appropriated funds to the Postal Service in 2001 and 2002 to support
the costs of maintaining the safety of Postal Service employees and customers as well as mail and packages in transit. These
appropriated funds were accounted for as deferred revenue upon receipt and were generally used to procure capital equipment.
When the Postal Service records depreciation expense for equipment purchased with funds from the Emergency Preparedness
Fund appropriation, it recognizes revenue for emergency preparedness appropriations concurrently. The emergency
preparedness appropriations revenue recognized was $86 million, $90 million and $48 million for the years ended
September 30, 2015, 2014 and 2013, respectively, and is included within Operating revenue in the accompanying Statements
of Operations. Deferred revenue related to emergency preparedness appropriations was $7 million and $93 million as of
September 30, 2015, and 2014, respectively, and is included within Other current liabilities and Other noncurrent liabilities
in the accompanying Balance Sheets.
Advertising
Advertising costs, which the Postal Service expenses as they are incurred, were $160 million, $175 million and $140 million
for the years ended September 30, 2015, 2014 and 2013, respectively, and are included within Other operating expenses in
the accompanying Statements of Operations.
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, based
on a group of currencies comprised of the Euro, Japanese yen, British pound sterling and the U.S. dollar, which fluctuate daily.