UPS 2011 Annual Report Download - page 132
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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 and interest rate swap contracts not designated
as hedges for the years ended December 31, 2011 and 2010 (in millions):
Derivative Instruments Not Designated in
Hedging Relationships
Location of Gain
(Loss) Recognized
in Income
2011 Amount
of Gain
(Loss)
Recognized in
Income
2010 Amount
of Gain
(Loss)
Recognized in
Income
Foreign Exchange Contracts ..................... Other Operating Expenses $ 2 $ 13
Interest Rate Swap Contracts .................... Interest Expense (8) —
Fair Value Measurements
Our foreign currency, interest rate and energy derivatives are largely comprised of over-the-counter
derivatives, which are primarily valued using pricing models that rely on market observable inputs such as yield
curves, currency exchange rates and commodity forward prices, and therefore are classified as Level 2. The fair
values of our derivative assets and liabilities as of December 31, 2011 and 2010 by hedge type are as follows (in
millions):
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance as of
December 31, 2011
2011:
Assets
Foreign Exchange Contracts ............... $— $166 $— $166
Interest Rate Contracts .................... — 483 — 483
Total .............................. $— $649 $— $649
Liabilities
Foreign Exchange Contracts ............... $— $185 $— $185
Interest Rate Contracts .................... — 23 — 23
Total .............................. $— $208 $— $208
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance as of
December 31, 2010
2010:
Assets
Foreign Exchange Contracts ............... $— $ 36 $— $ 36
Interest Rate Contracts .................... — 182 — 182
Total .............................. $— $218 $— $218
Liabilities
Foreign Exchange Contracts ............... $— $111 $— $111
Interest Rate Contracts .................... — 30 — 30
Total .............................. $— $141 $— $141
120