Our operating revenue includes accruals for revenue forgone. Revenue is forgone when Congress mandates that we provide free mail for certain mailers. Congress appropriates money to reimburse us for the revenue that we have forgone in providing these services. In our operating revenue, we have included as revenue the amounts appropriated by Congress for revenue forgone of $48 million for 2002, $67 million for 2001, and $64 million for 2000. Legislation enacted in 2002 and 2001 delayed payment of the amount authorized for 2002 and 2001 until the first day of the subsequent year, respectively. Accordingly, the Postal Service has recorded these amounts as a receivable at year end.

Under the Revenue Forgone Reform Act of 1993, Congress is required to reimburse us $29 million annually through 2035 (42 years). This reimbursement is for two purposes: services we performed in 1991, 1992 and 1993 for which we have not yet been paid; and for shortfalls in the reimbursement for the costs we incurred for processing and delivering certain nonprofit mail from 1994 through 1998.

The Revenue Forgone Reform Act of 1993 authorized a total of $1.218 billion in payments. We calculated the present value of these future reimbursements to be approximately $390 million at 7% interest. We recognized the $390 million as revenue during 1991 through 1998. The amounts receivable as of September 30, 2002 and 2001 were $370 million and $373 million, respectively.




At September 30, 2002, we estimate our financial commitment for approved capital projects in progress to be approximately $1,536 million.

Our total rental expense for the years ended September 30 is summarized as follows (dollars in millions):

		2002	2001	2000
	Non cancelable real estate leases including related taxes	$  894	$  863	$  806
	Facilities leases from General Services Administration subject to 120-day notice of cancellation	45	41	39
	Equipment and other short-term rentals	214	312	254
	TOTAL	$1,153	$1,216	$1,099

At September 30, 2002, our future minimum lease payments for all non cancelable leases are as follows (dollars in millions):

	Year	Operating	Capital
	2003	$  805	$   97
	2004	786	97
	2005	742	97
	2006	683	97
	2007	625	97
	After 2007	5,963	605
		$9,604	$1,090
	Less: Interest at 5.25%		268
	Total capital lease obligations		822
	Less: Short-term portion of capital lease obligations		55
	Long-term portion of capital lease obligations		$  767

Most of these leases contain renewal options for periods ranging from 3 to 20 years. Certain non cancelable real estate leases give us the option to purchase the facilities at prices specified in the leases.

Capital leases included in buildings were $1,038 million in 2002 and $909 million in 2001. Total accumulated amortization is $264 million in 2002 and $211 million in 2001. Amortization expense for assets recorded under capital leases is included in depreciation expense.




Each quarter we review litigation pending against us. As a result of this review, we classify and adjust our contingencies for claims that we think it is probable that we will lose and for which we can reasonably estimate the amount of the unfavorable outcome.

These claims cover labor, equal employment opportunity, environmental issues, traffic accidents, injuries on postal properties, personal claims and property damages, and suits and claims arising from postal contracts. We also recognize the settlements of claims and lawsuits and revisions of other estimates. Additionally, we evaluate the materiality of cases determined to have a reasonably possible chance of adverse outcome. Such cases are immaterial to our financial statements taken as a whole.

As a part of our continuing evaluation of estimates required in the preparation of management’s financial statements, we recorded a $128 million increase in liabilities in 2002, $35 million in 2001 and $63 million in 2000, to recognize changes in the estimated cost of litigation and claims asserted in prior years. We recognized settlements of claims and lawsuits and revised other estimates in our changes in contingent liabilities. Management and General Counsel believe that we have made adequate provision for the amounts that may become due under the suits, claims and proceedings we have discussed here.