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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Income Statement Recognition
The following table indicates the amount and location in the income statement for 2009 in which derivative
gains and losses, as well as the related amounts reclassified from AOCI, have been recognized for those
derivatives designated as cash flow hedges (in millions).
Year Ended December 31, 2009:
Derivative Instruments in Cash Flow Hedging Relationships
Amount of
Gain (Loss)
Recognized
in OCI on
Derivative
(Effective
Portion)
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion)
Amount of Gain
(Loss)
Reclassified
from
Accumulated
OCI into Income
(Effective
Portion)
Interest rate contracts ................................... $127 Interest Expense $ (15)
Foreign exchange contracts .............................. (42) Interest Expense (4)
Foreign exchange contracts .............................. (75) Revenue 96
Commodity contracts ................................... — Revenue 82
Total ............................................ $ 10 $159
As of December 31, 2009, $15 million of pre-tax gains 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, 2010.
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,
2009, 2008 and 2007.
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 year ended December 31, 2009 (in millions).
Derivative Instruments in Fair Value
Hedging Relationships
Location of Gain
(Loss) Recognized
in Income
Amount
Recognized
in Income
Hedged Items in Fair
Value Hedging
Relationships
Location of Gain (Loss)
Recognized in Income
Amount
Recognized
in Income
Interest rate contracts ........ Interest Expense $68 Fixed-Rate Debt and
Capital Leases
Interest Expense $(68)
Additionally, we maintain some interest rate swap and foreign exchange forward contracts that are not
designated as hedges. The interest rate swap contracts are intended to provide an economic hedge of a portfolio
of interest bearing receivables. The 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. For the
twelve months ended December 31, 2009, we recognized $15 million in losses, respectively, on the fair value of
the foreign exchange forward contracts, which were reported in “other operating expenses” in the consolidated
income statement, while the impact of the interest rate swap contracts was not material. The foreign exchange
forward contracts are settled at the end of each month, and therefore no asset or liability was recorded on the
balance sheet at December 31, 2009.
104