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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
109
Gross Amounts Presented in
Consolidated Balance Sheets Net Amounts if Right of
Offset had been Applied
Liability Derivatives Balance Sheet Location 2013 2012 2013 2012
Derivatives designated as hedges:
Foreign exchange contracts Other current liabilities $ 6 $ — $ — $ —
Foreign exchange contracts Other non-current liabilities — 103 — 101
Interest rate contracts Other non-current liabilities 104 14 10 —
Derivatives not designated as hedges:
Foreign exchange contracts Other current liabilities 7 1 5 1
Interest rate contracts Other current liabilities 1 — 1 —
Interest rate contracts Other non-current liabilities 3 41 — 31
Total Liability Derivatives $ 121 $ 159 $ 16 $ 133
Income Statement and Other Comprehensive Income Recognition
The following table indicates the amount of gains and losses that have been recognized in other comprehensive income for the
years ended December 31, 2013 and 2012 for those derivatives designated as cash flow hedges (in millions):
Derivative Instruments in Cash Flow Hedging Relationships
Amount of Gain (Loss) Recognized in OCI on
Derivative (Effective Portion)
2013 2012
Interest rate contracts $ 6 $ (71)
Foreign exchange contracts 44 3
Commodity contracts (48) —
Total $ 2 $ (68)
As of December 31, 2013, $83 million of pre-tax losses related to cash flow hedges that are currently deferred in AOCI are
expected to be reclassified to income over the 12 month period ended December 31, 2014. 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, 2013, 2012 and 2011.
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 years ended December 31, 2013 and 2012 (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
2013 2012 2013 2012
Interest rate
contracts Interest Expense $ (306) $ 20 Fixed-Rate Debt
and Capital Leases Interest Expense $ 306 $ (20)
Additionally, we maintain some foreign exchange forward and interest rate swap contracts that are not designated as hedges.
These foreign exchange forward contracts are intended to provide an economic offset to foreign currency remeasurement risks for
certain assets and liabilities in our consolidated balance sheets. These interest rate swap contracts are intended to provide an
economic hedge of a portfolio of interest bearing receivables. The income statement impact of these hedges was not material for any
period presented.
We also periodically terminate interest rate swaps and foreign currency options by entering into offsetting swap and foreign
currency positions with different counterparties. As part of this process, we de-designate our original swap and foreign currency
contracts. These transactions provide an economic offset that effectively eliminates the effects of changes in market valuation.