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)

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

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



	September 30, 2015		December 31, 2014
Currency hedges:
British Pound Sterling	GBP	1,223	GBP	1,149
Canadian Dollar	CAD	252	CAD	293
Euro	EUR	1,842	EUR	2,833
Indian Rupee	INR	205	INR	85
Malaysian Ringgit	MYR	—	MYR	150
Mexican Peso	MXN	2,571	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	251	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	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
Derivatives designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	$	357	$	204	$	357	$	204
Foreign exchange contracts	Derivative assets	Level 2	109		229		109		229
Interest rate contracts	Derivative assets	Level 2	275		227		262		194
Derivatives not designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	5		2		5		2
Interest rate contracts	Derivative assets	Level 2	71		59		64		57
Total Asset Derivatives			$	817	$	721	$	797	$	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	September 30, 2015		December 31, 2014		September 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	13		35		—		2
Derivatives not designated as hedges:
Foreign exchange contracts	Other current liabilities	Level 2	3		—		3		—
Interest rate contracts	Other current liabilities	Level 2	—		1		—		1
Investment market price contracts	Other current liabilities	Level 2	36		—		36		—
Interest rate contracts	Other non-current liabilities	Level 2	25		7		18		5
Total Liability Derivatives			$	77	$	77	$	57	$	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 nine months ended September 30, 2015 and 2014 for those derivatives designated as cash flow hedges (in millions):



Three Months Ended September 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	)	$	—
Foreign exchange contracts	44			277
Total	$	43		$	277

Nine Months Ended September 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	)	$	(3	)
Foreign exchange contracts	191			209
Total	$	190		$	206

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 nine months ended September 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 September 30:
Interest rate contracts	Interest Expense	$	(2	)	$	(1	)
Foreign exchange contracts	Other Operating Expenses	2			24
Foreign exchange contracts	Investment Income	14			(5		)
Foreign exchange contracts	Interest Expense	(30		)	—
Investment market price contracts	Investment Income	(27		)	—
		$	(43	)	$	18
Nine Months Ended September 30:
Interest rate contracts	Interest Expense	$	(5	)	$	(4	)
Foreign exchange contracts	Other Operating Expenses	18			20
Foreign exchange contracts	Investment Income	49			(3		)
Foreign exchange contracts	Interest Expense	6			—
Investment market price contracts	Investment Income	(36		)	—
		$	32		$	13

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 nine months ended September 30, 2015 and 2014 (in millions):



Derivative Instruments in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized in Income	Derivative Amount of Gain (Loss) Recognized in Income					Hedged Items in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized In Income	Hedged Items 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 September 30:
Interest rate contracts	Interest Expense	$	80	$	(49	)	Fixed-Rate Debt and Capital Leases	Interest Expense	$	(80	)	$	49
Nine Months Ended September 30:
Interest rate contracts	Interest Expense	$	71	$	34		Fixed-Rate Debt and Capital Leases	Interest Expense	$	(71	)	$	(34	)