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, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

As of September 30, 2014 and December 31, 2013, the notional amounts of our outstanding derivative positions were as follows (in millions):



	September 30, 2014		December 31, 2013
Currency hedges:
British Pound Sterling	GBP	1,240	GBP	1,097
Canadian Dollar	CAD	368	CAD	218
Euro	EUR	3,205	EUR	2,637
Indian Rupee	INR	298	INR	—
Malaysian Ringgit	MYR	370	MYR	—
Mexican Peso	MXN	1,091	MXN	583

Interest rate hedges:
Fixed to Floating Interest Rate Swaps	$	5,799	$	6,799
Floating to Fixed Interest Rate Swaps	$	779	$	780
Interest Rate Basis Swaps	$	1,500	$	2,500

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, 2014		December 31, 2013		September 30, 2014		December 31, 2013
Derivatives designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	$	112	$	10	$	112	$	4
Interest rate contracts	Other current assets	Level 2	—		7		—		7
Foreign exchange contracts	Other non-current assets	Level 2	191		59		191		59
Interest rate contracts	Other non-current assets	Level 2	197		204		143		110
Derivatives not designated as hedges:
Foreign exchange contracts	Other current assets	Level 2	13		7		13		5
Interest rate contracts	Other non-current assets	Level 2	54		60		54		57
Total Asset Derivatives			$	567	$	347	$	513	$	242




		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, 2014		December 31, 2013		September 30, 2014		December 31, 2013
Derivatives designated as hedges:
Foreign exchange contracts	Other current liabilities	Level 2	$	—	$	6	$	—	$	—
Foreign exchange contracts	Other non-current liabilities	Level 2	27		—		27		—
Interest rate contracts	Other non-current liabilities	Level 2	59		104		5		10
Derivatives not designated as hedges:
Foreign exchange contracts	Other current liabilities	Level 2	16		7		16		5
Interest rate contracts	Other current liabilities	Level 2	2		1		2		1
Interest rate contracts	Other non-current liabilities	Level 2	—		3		—		—
Total Liability Derivatives			$	104	$	121	$	50	$	16

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 other comprehensive income for the three and nine months ended September 30, 2014 and 2013 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 OCI on Derivative (Effective Portion)
Derivative Instruments in Cash Flow Hedging Relationships	2014			2013
Interest rate contracts	$	—		$	1
Foreign exchange contracts	277			44
Commodity contracts	—			—
Total	$	277		$	45

Nine Months Ended September 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	2014			2013
Interest rate contracts	$	(3	)	$	4
Foreign exchange contracts	209			53
Commodity contracts	—			(48		)
Total	$	206		$	9

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 and foreign currency forward contracts not designated as hedges for the three and nine months ended September 30, 2014 and 2013 (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	2014			2013
Three Months Ended September 30:
Interest rate contracts	Interest Expense	$	(1	)	$	2
Foreign exchange contracts	Other Operating Expenses	24			(8		)
Foreign exchange contracts	Investment Income	(5		)	(11		)
		$	18		$	(17	)
Nine Months Ended September 30:
Interest rate contracts	Interest Expense	$	(4	)	$	(2	)
Foreign exchange contracts	Other Operating Expenses	20			76
Foreign exchange contracts	Investment Income	(3		)	4
		$	13		$	78

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, 2014 and 2013 (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	2014			2013			Hedged Items in Fair Value Hedging Relationships	Location of Gain (Loss) Recognized In Income	2014			2013
Three Months Ended September 30:
Interest rate contracts	Interest Expense	$	(49	)	$	3		Fixed-Rate Debt and Capital Leases	Interest Expense	$	49		$	(3	)
Nine Months Ended September 30:
Interest rate contracts	Interest Expense	$	34		$	(230	)	Fixed-Rate Debt and Capital Leases	Interest Expense	$	(34	)	$	230