United Parcel Service, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position

The following table indicates the amount of gains and losses that have been recognized in the income statement for the fair value and cash flow hedges, as well as the associated gain or (loss) for the underlying hedged item for fair value hedges for the years ended December 31, 2019 and 2018 (in millions):



	Year Ended December 31,							Year Ended December 31,
	2019							2018
Location and Amount of Gain (Loss) Recognized in Income on Fair Value and Cash Flow Hedging Relationships	Revenue		Interest Expense			Investment Income and Other		Revenue			Interest Expense			Investment Income and Other
Gain or (loss) on fair value hedging relationships:
Interest Contracts:
Hedged items	$	—	$	(38	)	$	—	$	—		$	57		$	—
Derivatives designated as hedging instruments	—		38			—		—			(57		)	—
Gains or (loss) on cash flow hedging relationships:
Interest Contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income	—		(15		)	—		—			(24		)	—
Foreign Exchange Contracts:
Amount of gain or (loss) reclassified from accumulated other comprehensive income	177		—			—		(50		)	—			—
Total amounts of income and expense line items presented in the statement of income in which the effects of fair value or cash flow hedges are recorded	$	177	$	(15	)	$	—	$	(50	)	$	(24	)	$	—

Notional Amounts of Outstanding Derivative Positions

The notional amounts of our outstanding derivative positions were as follows as of December 31, 2019 and 2018 (in millions):



		2019	2018
Currency Hedges:
Euro	EUR	4,571	4,924
British Pound Sterling	GBP	1,494	2,037
Canadian Dollar	CAD	1,402	1,443
Hong Kong Dollar	HKD	3,327	3,642
Singapore Dollar	SGD	—	20

Interest Rate Hedges:
Fixed to Floating Interest Rate Swaps	USD	3,674	4,674
Floating to Fixed Interest Rate Swaps	USD	778	778

Balance sheet location of derivative assets and liabilities and their related fair values

The following table indicates the location in the consolidated balance sheets where 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).

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 in the 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 in the consolidated balance sheets had we elected to apply the right of offset.



			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	2019		2018		2019		2018
Derivatives designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	$	138	$	90	$	131	$	83
Interest rate contracts	Other current assets	Level 2	2		1		2		1
Foreign exchange contracts	Other non-current assets	Level 2	252		230		236		215
Interest rate contracts	Other non-current assets	Level 2	21		14		20		6
Derivatives not designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	7		7		7		5
Foreign exchange contracts	Other non-current assets	Level 2	—		1		—		1
Interest rate contracts	Other non-current assets	Level 2	12		18		11		18
Total Asset Derivatives			$	432	$	361	$	407	$	329



			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	2019		2018		2019		2018
Derivatives designated as hedges:
Foreign exchange contracts	Other current liabilities	Level 2	$	7	$	7	$	—	$	—
Foreign exchange contracts	Other non-current liabilities	Level 2	16		15		—		—
Interest rate contracts	Other non-current liabilities	Level 2	11		41		10		33
Derivatives not designated as hedges:
Foreign exchange contracts	Other current liabilities	Level 2	—		3		—		1
Foreign exchange contracts	Other non-current liabilities	Level 2	—		1		—		1
Interest rate contracts	Other non-current liabilities	Level 2	3		—		2		—
Total Liability Derivatives			$	37	$	67	$	12	$	35

The following table indicates the amounts that were recorded in the consolidated balance sheets related to cumulative basis adjustments for fair value hedges as of December 31, 2019 and December 31, 2018 (in millions).

Carrying Amount of Hedged Liabilities

Cumulative Amount of Fair Value Hedge Adjustments

Carrying Amount of Hedged Liabilities

Cumulative Amount of Fair Value Hedge Adjustments

Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included

December 31, 2019

December 31, 2018

Long-Term Debt and Finance Leases

3,234

4,207

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 years ended December 31, 2019 and 2018 for those derivatives designated as cash flow hedges (in millions):



Derivative Instruments in Cash Flow Hedging Relationships	Amount of Gain (Loss) Recognized in AOCI on Derivatives
Derivative Instruments in Cash Flow Hedging Relationships	2019		2018
Interest rate contracts	$	6	$	1
Foreign exchange contracts	250		563
Total	$	256	$	564

The following table indicates the amount of gains and losses that have been recognized in AOCI within foreign currency translation adjustment for the years ended December 31, 2019 and 2018 for those instruments designated as net investment hedges (in millions):



Non-derivative Instruments in Net Investment Hedging Relationships	Amount of Gain (Loss) Recognized in AOCI on Debt
	2019		2018
Foreign denominated debt	$	75	$	211
Total	$	75	$	211

Not Designated as Hedging Instrument

Amount and Location in the Income Statement for Derivatives Designated as Fair Value Hedges

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 years ended December 31, 2019 and 2018 (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	2019			2018
Interest rate contracts	Interest expense	$	(9	)	$	(9	)
Foreign exchange contracts	Investment income and other	(1		)	(102		)
Investment market price contracts	Investment income and other	—			16
Total		$	(10	)	$	(95	)