UPS 2011 Annual Report Download - page 80

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
We participate in a number of trustee-managed multiemployer pension and health and welfare plans for
employees covered under collective bargaining agreements. Our contributions to these plans are determined in
accordance with the respective collective bargaining agreements. We recognize expense for the contractually
required contribution for each period, and we recognize a liability for any contributions due and unpaid (included
in “other current liabilities”).
In the fourth quarter of 2011, we elected to change our accounting methodologies for recognizing expense
for our company-sponsored U.S. and international pension and other postretirement benefit plans. Previously, net
actuarial gains or losses in excess of 10% of the greater of the market-related value of plan assets or the plans’
projected benefit obligations (the “corridor”) were recognized over the average remaining service life of
employees in each respective plan. Further, for our largest pension plan (the UPS Retirement Plan), we used a
calculated value of plan assets reflecting changes in the fair value of plan assets over a five-year period.
Under our new accounting methods, we will recognize changes in the fair value of plan assets and net
actuarial gains or losses in excess of the corridor annually in the fourth quarter each year. These new accounting
methods result in changes in the fair value of plan assets and net actuarial gains and losses being recognized in
expense faster than our previous amortization method. The remaining components of pension expense, primarily
service and interest costs and the expected return on plan assets, will be recorded on a quarterly basis as ongoing
pension expense. While the historical policy of recognizing pension and other postretirement benefit expense was
considered acceptable, we believe that these new policies are preferable as they accelerate the recognition in our
operating results of changes in the fair value of plan assets and actuarial gains and losses outside the corridor.
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