US Postal Service 2006 Annual Report Download - page 52

50 | 2006 Annual Report United States Postal Service
Retiree Benefits
HEALTH BENEFITS
We are required to pay a portion of the health insurance premiums of
those retirees and their survivors who participate in the Federal Employees
Health Benefits Program (FEHBP). FEHBP is sponsored by the U.S.
government. We cannot direct the costs, benefits, or funding requirements
of the federally-sponsored plan. We account for our participation in FEHBP
using multi-employer plan accounting rules in accordance with FASB 106,
Employers’ Accounting for Postretirement Benefits Other Than Pensions.
We account for employee and retiree health benefit costs as an expense in
the period our contribution is due and payable to the FEHBP. See Note 9,
Health Benefits Programs for additional information.
RETIREMENT BENEFITS
We are an independent establishment of the executive branch of the U.S.
government. We provide pension benefits as defined and administered
by the Office of Personnel Management (OPM) and, therefore, have a
parent-subsidiary type relationship. We cannot direct the costs, benefits,
or funding requirements of the federally-sponsored plan. We account
for our participation in U.S. government sponsored retirement plans
using multi-employer plan accounting rules in accordance with Financial
Accounting Standards Board Statement 87, Employers’ Accounting for
Pension Costs.
See Note 10, Retirement Programs for additional information.
Revenue Forgone Appropriation
Revenue forgone is an appropriation from Congress which covers our cost
of providing free and reduced rate mailing service to groups designated
by Congress. The amount of expense estimated by the Postal Service is
submitted to Congress annually and Congress subsequently approves or
alters the amount and funds the necessary appropriation. See Note 12,
Revenue Forgone for additional information.
Emergency Preparedness Appropriation
Emergency preparedness appropriations are the funds we received from
the federal government to help pay the costs of keeping the mail, postal
employees and postal customers safe and are restricted for such use.
Upon receipt of the funds, we established a liability. As we recognize
emergency preparedness operating expenses, we recognize operating
revenue. See Note 13, Emergency Preparedness Funding for additional
information.
Note 3 – Recent Pronouncements
Currently no new pronouncements are pending that have not been
incorporated into our accounting policies.
Note 4 – Debt and Related Interest
Borrowing Limits and Debt
Under the Postal Reorganization Act, as amended by Public Law 101-227,
we can issue and sell debt obligations. However, we are limited to net
annual increases of $2 billion in our debt for capital improvements and $1
billion for defraying operating expenses. Our total debt cannot exceed $15
billion.
On September 30, 2006, we borrowed $2.1 billon in short term debt.
Debt consists of $2.1 billion in cash drawn on our line of credit with the
Federal Financing Bank. At September 30, 2005, no debt was outstand-
ing on our balance sheet. At year end, the current estimated market value
of our debt is $2.1 billion.
This debt was paid October 3, 2006.
Interest Payments on Retirement
Cash outlays for interest on the retirement “supplemental liability,” were
$231 million in 2006, $263 million in 2005 and $219 million in 2004.
See Note 10, Retirement Programs for additional information.
Interest on retirement is primarily all of our interest expense.
Note Purchase Agreements
Our Note Purchase Agreements with the Federal Financing Bank provide
for revolving credit lines of $4 billion. These credit lines enable us to
draw up to $3.4 billion with two days’ notice and up to $600 million on
the same business day the funds are needed. Under these agreements
we can also use a series of other notes with varying provisions to draw
upon with two days’ notice. The notes provide us the flexibility to borrow
short-term or long-term, using fixed or floating rate debt, and can be
either callable or non-callable.
Note 5 – Property and Equipment
Interest Capitalization
No interest was capitalized in 2006 and 2005 as no outstanding debt
balance was carried for this period, except on September 30, 2006. In
2004, interest was capitalized in the amount of $5 million.
Repairs and Maintenance
Repairs and maintenance are charged to expense as incurred. This
expense amounted to $933 million in 2006, $809 million in 2005 and
$744 million in 2004.
Impaired Assets
In 2006, we had no newly reported impaired assets.
In 2005, hurricane Katrina devastated the gulf coast and damaged many
of our facilities in that area. As a result we recorded an estimated loss of
$7.5 million for impaired assets.
Notes to the Financial Statements