United Parcel Service, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

6 Months Ended

Jun. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

As of June 30, 2015 and December 31, 2014, the notional amounts of our outstanding derivative positions were as follows (in millions):



	June 30, 2015		December 31, 2014
Currency hedges:
British Pound Sterling	GBP	1,282	GBP	1,149
Canadian Dollar	CAD	320	CAD	293
Euro	EUR	2,148	EUR	2,833
Indian Rupee	INR	231	INR	85
Malaysian Ringgit	MYR	—	MYR	150
Mexican Peso	MXN	5,977	MXN	152

Interest rate hedges:
Fixed to Floating Interest Rate Swaps	$	5,799	$	5,799
Floating to Fixed Interest Rate Swaps	$	779	$	779
Interest Rate Basis Swaps	$	—	$	1,500

Investment market price hedges:
Marketable Securities	EUR	202	EUR	—

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table indicates the location on the consolidated balance sheets in which our derivative assets and liabilities have been recognized, the fair value hierarchy level applicable to each derivative type and the related fair values of those derivatives (in millions). The table is segregated between those derivative instruments that qualify and are designated as hedging instruments and those that are not, as well as by type of contract and whether the derivative is in an asset or liability position.

We have master netting arrangements with substantially all of our counterparties giving us the right of offset for our derivative positions. However, we have not elected to offset the fair value positions of our derivative contracts recorded on our consolidated balance sheets. The columns labeled "Net Amounts if Right of Offset had been Applied" indicate the potential net fair value positions by type of contract and location on the consolidated balance sheets had we elected to apply the right of offset.



		Fair Value Hierarchy Level	Gross Amounts Presented in Consolidated Balance Sheets				Net Amounts if Right of Offset had been Applied
Asset Derivatives	Balance Sheet Location	Fair Value Hierarchy Level	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
Derivatives designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	$	337	$	204	$	337	$	204
Foreign exchange contracts	Derivative assets	Level 2	161		229		161		229
Interest rate contracts	Derivative assets	Level 2	218		227		185		194
Derivatives not designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	19		2		19		2
Investment market price contracts	Other current assets	Level 2	1		—		—		—
Interest rate contracts	Derivative assets	Level 2	56		59		54		57
Total Asset Derivatives			$	792	$	721	$	756	$	686




		Fair Value Hierarchy Level	Gross Amounts Presented in Consolidated Balance Sheets				Net Amounts if Right of Offset had been Applied
Liability Derivatives	Balance Sheet Location	Fair Value Hierarchy Level	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
Derivatives designated as hedges:
Foreign exchange contracts	Other non-current liabilities	Level 2	$	—	$	34	$	—	$	34
Interest rate contracts	Other non-current liabilities	Level 2	34		35		1		2
Derivatives not designated as hedges:
Foreign exchange contracts	Other current liabilities	Level 2	2		—		2		—
Interest rate contracts	Other current liabilities	Level 2	—		1		—		1
Investment market price contracts	Other current liabilities	Level 2	10		—		9		—
Interest rate contracts	Other non-current liabilities	Level 2	8		7		6		5
Total Liability Derivatives			$	54	$	77	$	18	$	42

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

The following table indicates the amount of gains and losses that have been recognized in AOCI for the three and six months ended June 30, 2015 and 2014 for those derivatives designated as cash flow hedges (in millions):



Three Months Ended June 30:
Derivative Instruments in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)
Derivative Instruments in Cash Flow Hedging Relationships	2015			2014
Interest rate contracts	$	1		$	(1	)
Foreign exchange contracts	(173		)	(31		)
Total	$	(172	)	$	(32	)

Six Months Ended June 30:
Derivative Instruments in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)
Derivative Instruments in Cash Flow Hedging Relationships	2015			2014
Interest rate contracts	$	—		$	(3	)
Foreign exchange contracts	147			(68		)
Total	$	147		$	(71	)

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The following is a summary of the amounts recorded in the statements of consolidated income related to fair value changes and settlements of these interest rate swaps, foreign currency forward and investment market price forward contracts not designated as hedges for the three and six months ended June 30, 2015 and 2014 (in millions):



Derivative Instruments Not Designated in Hedging Relationships	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income
	Location of Gain (Loss) Recognized in Income	2015			2014
Three Months Ended June 30:
Interest rate contracts	Interest Expense	$	(2	)	$	(1	)
Foreign exchange contracts	Other Operating Expenses	(5		)	(2		)
Foreign exchange contracts	Investment Income	33			2
Foreign exchange contracts	Interest Expense	36			—
Investment market price contracts	Investment Income	(7		)	—
		$	55		$	(1	)
Six Months Ended June 30:
Interest rate contracts	Interest Expense	$	(3	)	$	(3	)
Foreign exchange contracts	Other Operating Expenses	16			(4		)
Foreign exchange contracts	Investment Income	35			2
Foreign exchange contracts	Interest Expense	36			—
Investment market price contracts	Investment Income	(9		)	—
		$	75		$	(5	)

The following table indicates the amount and location in the statements of consolidated income in which derivative gains and losses, as well as the associated gains and losses on the underlying exposure, have been recognized for those derivatives designated as fair value hedges for the three and six months ended June 30, 2015 and 2014 (in millions):



Derivative Instruments in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income					Hedged Items in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized In Income	Amount of Gain (Loss) Recognized in Income
	Location of Gain (Loss) Recognized in Income	2015			2014		Hedged Items in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized In Income	2015		2014
Three Months Ended June 30:
Interest rate contracts	Interest Expense	$	(64	)	$	53	Fixed-Rate Debt and Capital Leases	Interest Expense	$	64	$	(53	)
Six Months Ended June 30:
Interest rate contracts	Interest Expense	$	(9	)	$	83	Fixed-Rate Debt and Capital Leases	Interest Expense	$	9	$	(83	)