result in a gain or loss from revaluation reported in the results from operations. The actual currency used to settle accounts varies by country.

The loss recorded on the statement of operations from this revaluation was $9 million in 2003, $7 million in 2002 and $0 in 2001. In addition to the year end revaluation, we also recognize gains and losses on our payables and receivables when we settle with foreign postal administrations. The impact on the statement of operations from these settlement losses was $12 million in 2003, $7 million in 2002 and $7 million in 2001.

Supplies, Advances and Prepayments

Supplies, advances and prepayments are primarily composed of our inventories of supplies, motor vehicle parts, parts for mail processing equipment and advances to employees for annual leave. We value our inventories at the lower of average cost or current market price. Total inventories amounted to $123 million at the end of 2003 and $136 million at the end of 2002.

Property and Equipment

We record property and equipment at what it costs us to acquire the assets, including the interest we pay on the money we borrow to pay for the construction of major capital additions. This interest amounted to $1 million in 2003, $23 million in 2002 and $50 million in 2001. Repairs and maintenance are charged to expense as incurred. This expense amounted to $692 million in 2003, $577 million in 2002 and $600 million in 2001.

We depreciate buildings and equipment over their estimated useful lives, which range from 3 to 75 years, using the straight-line method. We amortize leasehold improvements over the period of the lease or the useful life of the improvement, whichever time is shorter.

Impaired Assets

We record losses on long-lived assets when events and circumstances indicate that the assets might be impaired. In accordance with FAS Statement No. 144, Accounting for the Impairment or Disposal of Long- Lived Assets, we have written down our impaired assets to the lower of cost or fair value. No material impairments were recorded in 2003, 2002 or 2001.

Allowance for Doubtful Accounts

We provide an allowance for doubtful accounts in our outstanding receivables based on our collection history and an estimate of uncollectible accounts.

Revenue Recognition/Estimated Prepaid Postage

We recognize revenue when service is rendered. Estimated prepaid postage is the amount of cash we estimate that we collected by the end of the year for services that we will perform in the following year. In 2002 after extensive analysis, we changed our estimate of the sampling period for meter customers from 92 days to 30 days to more closely reflect the meter resetting practices of our customers. The impact of this change in estimate was a $113 million reduction of the liability in 2002.

Compensation and Benefits Payable

These are the salaries and benefits we owe to current and retired employees, including the amounts employees have earned but have not yet been paid, current workers' compensation, unemployment costs, health benefits and the current portion of the amounts payable for retirement benefits.

Deferred Retirement Benefits and Costs

We are an independent establishment of the executive branch of the U.S. government. We provide pension benefits as defined by OPM and, therefore, have a parent-subsidiary relationship. We accounted for our participation in the U.S. government sponsored retirement plans as a participant in a multi-employer plan arrangement in accordance with FAS 87, Employer's Accounting For Pension Costs. See Notes 6 and 7 for additional information.

Post-Retirement Health Benefits

Retiree health benefits costs are those obligations we pay as a portion of the health insurance premiums of those retirees and their survivors who participate in the Federal Employees Health Benefits Program (FEHBP). We account for our participation in FEHBP as a participant in a multi-employer plan arrangement. Therefore, the costs of retiree health benefits are expensed as we incur them. See Note 4 for additional information.

Workers' Compensation Costs

We are self-insured for workers' compensation costs under a program administered by the Department of Labor (DOL).We record these costs, which include injured employee' medical expenses and payment for continuation of wages, as an operating expense.

At the end of the year, our liability represents the estimated present value of the total amounts we expect to pay in the future for postal workers injured