UPS 2010 Annual Report Download - page 121

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The actual amounts that will be reclassified to income over the next 12 months will vary from this amount as a
result of changes in market conditions. The amount of ineffectiveness recognized in income on derivative
instruments designated in cash flow hedging relationships was immaterial for the years ended December 31,
2010, 2009 and 2008.
The following table indicates the amount and location in the income statement 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 years ended December 31, 2010 and 2009 (in millions):
Derivative Instruments in
Fair Value Hedging
Relationships
Location of
Gain (Loss)
Recognized in
Income
2010
Amount of
Gain
(Loss)
Recognized
in Income
2009
Amount of
Gain
(Loss)
Recognized
in Income
Hedged Items in
Fair Value Hedging
Relationships
Location of Gain
(Loss)
Recognized in
Income
2010
Amount of
Gain
(Loss)
Recognized
in Income
2009
Amount of
Gain
(Loss)
Recognized
in Income
Interest rate contracts ....Interest Expense $134 $68 Fixed-Rate Debt
and Capital Leases
Interest Expense $(134) $(68)
Additionally, we maintain some interest rate swap and foreign exchange forward contracts that are not
designated as hedges. These interest rate swap contracts are intended to provide an economic hedge of a portfolio
of interest bearing receivables, however the income statement impact of these hedges was not material for any
period presented. These foreign exchange forward contracts are intended to provide an economic offset to foreign
currency remeasurement risks for certain assets and liabilities in our balance sheet. The following is a summary
of the amounts recorded in the statements of consolidated income related to fair value changes and settlements of
these foreign currency forward contracts not designated as hedges for the years ended December 31, 2010 and
2009 (in millions):
Derivative Instruments Not Designated in
Hedging Relationships
Location of Gain
(Loss) Recognized
in Income
2010 Amount
of Gain
(Loss)
Recognized in
Income
2009 Amount
of Gain
(Loss)
Recognized in
Income
Foreign Exchange Contracts ...................... Other Operating Expenses $13 $(15)
109