What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-17 compared with 2025-02-18 · 690 added, 890 removed, 1739 unchanged (48% of the section changed)

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of U.S.

hedge fund, risk parity, private debt, private equity and real estate investments — Refer to Note 5, Company-Sponsored Employee Benefit Plans (Fair Value Measurements), to the financial statements

Goodwill – Global Freight Forwarding and Healthcare Logistics Distribution Reporting Units — Refer to Notes 1 and 7 to the consolidated financial statements

Critical Audit Matter Description

The Company’s U.S.

pension and postretirement medical benefit plans (the "U.S.

Plans") held hedge fund, private debt, private equity and real estate investments valued at $10.1 billion as of December 31, 2024.

The Company determines the reported values of the U.S.

Plans’ investments in hedge fund, private debt, private equity and real estate funds primarily based on the estimated net asset value ("NAV") of the fund.

In order to estimate NAV, the Company evaluates audited and unaudited financial reports from fund managers, and makes adjustments, as appropriate, for investment activity between the date of the financial reports and December 31.

These investments are not actively traded, and their values can only be estimated using these subjective assumptions.

Auditing the estimated NAV of these hedge fund, private debt, private equity and real estate investments requires a high degree of auditor judgment and subjectivity to evaluate the completeness, reliability and relevance of the inputs used by management.

The Company tests goodwill for impairment annually as of July 1, or more frequently if circumstances require, by determining if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

For certain reporting units, the Company uses a combination of income and market approaches to develop an estimate of reporting unit fair value.

The income approach uses a discounted cash flow model, which requires the Company to make a number of significant assumptions to produce an estimate of future cash flows.

These assumptions include projections of future revenue, costs, capital expenditures, working capital, long-term growth rates and the discount rate.

The market approach uses observable market data of comparable public companies to estimate fair value utilizing financial metrics (such as enterprise value to net sales).

the annual test date, the Company had recorded balances of goodwill of $877 million related to Global Freight Forwarding ("GFF") and $738 million related to Healthcare Logistics Distribution ("HLD") reporting units.

The Company did not record any goodwill impairments during 2025.

We identified the valuation of the GFF and HLD reporting units as a critical audit matter because of the significant judgments required to estimate the fair value of the reporting units.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the forecasts of future revenue and costs and the selection of the discount rate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the inputs used by management to estimate the NAV of the U.S.

Plans’ hedge fund, private debt, private equity and real estate investments (collectively, the “funds”) included the following, among others:

• We tested the effectiveness of controls, including those related to the reliability of values reported by fund managers, the relevance of asset class benchmark returns, and the completeness and accuracy of unobservable inputs related to the underlying assets of the funds, including certain controls for which the control design was modified following the transition of the UPS Group Trust’s investment management function to Goldman Sachs.

• For a selection of investments, we evaluated certain inputs and recalculated ending values in accordance with management’s processes and confirmed directly with the respective fund manager its preliminary estimate of the fund’s NAV as of December 31, 2024.

• We evaluated the Company’s historical ability to accurately estimate NAV for these funds by comparing each fund’s recorded valuation as of its prior fiscal year end to the NAV per the audited fund financial statements (which are received in arrears of the Company’s reporting timetable).

Revenue — Refer to Note 2, Revenue Recognition, to the financial statements

Our audit procedures related to the forecasts of future revenue and costs, and the selection of the discount rate, used by management to estimate the fair value of the GFF and HLD reporting units included the following, among others:

• We tested the design and operating effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the GFF and HLD reporting units, such as controls related to management’s forecasts of revenue and costs and selection of the discount rate.

• We performed a sensitivity analysis of the forecasts of revenue and costs, including their impact on future cash flows, and the selected discount rate.

• We evaluated management's ability to accurately forecast by comparing actual results to management's historical forecasts.

• We evaluated the reasonableness of management’s forecasts by comparing the forecasts to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in relevant industry reports.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the selected discount rate, by:

– Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation.

– Developing a range of independent estimates and comparing those to the discount rate selected by management.

– Evaluating the forecasts to understand and sensitize management's assumptions regarding the risk inherent in the forecasts.

Revenue — Refer to Notes 1 and 2 to the consolidated financial statements

Critical Audit Matter Description

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Cash and cash equivalents $ 5,887 $ 6,112

Marketable securities 206 2,866

Accounts receivable 11,007 11,342

Allowance for credit losses ( 136 ) ( 126 )

Accounts receivable, net 11,209 10,871

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Current Liabilities:

Current maturities of long-term debt, commercial paper and finance leases $ 1,838 $ 3,348

Current maturities of long-term debt and finance leases

$ 608 $ 1,838

Current maturities of operating leases 763 733

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Deferred compensation obligations 5 7

Treasury stock ( 0.1 and 0.2 in 2024 and 2023, respectively)

Treasury stock ( 0.1 shares in 2025 and 2024)

Total Equity for Controlling Interests 16,227 16,718

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(In millions, except per share amounts)

Years Ended December 31,

2025 2024 2023

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Diluted Earnings Per Share $ 6.56 $ 6.75 $ 7.80

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(In millions)

Years Ended December 31,

2025 2024 2023

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Change in foreign currency translation adjustment, net of tax 528 ( 338 ) 198

Change in unrealized gain (loss) on marketable securities, net of tax 1 9 ( 10 )

Change in unrealized gain (loss) on cash flow hedges, net of tax 167 ( 243 ) 184

Change in unrealized gain on marketable securities, net of tax

Change in unrealized (loss) gain on cash flow hedges, net of tax

( 344 ) 167 ( 243 )

Change in unrecognized pension and postretirement benefit costs, net of tax ( 84 ) ( 381 ) ( 2,173 )

Comprehensive Income (Loss) $ 5,231 $ 4,499 $ 13,277

Comprehensive Income

$ 5,673 $ 5,231 $ 4,499

See notes to audited, consolidated financial statements.

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(In millions)

Years Ended December 31,

2025 2024 2023

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Other (gains) losses 113 262 265

Changes in assets and liabilities, net of effects of business acquisitions and dispositions:

Changes in assets and liabilities, net of effects of business acquisitions:

Accounts receivable ( 382 ) ( 566 ) 1,256

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End of period $ 5,887 $ 6,112 $ 3,206

Cash Paid During the Period For:

Interest (net of amount capitalized) $ 854 $ 762 $ 721

Income taxes (net of refunds) $ 1,347 $ 1,976 $ 2,574

See notes to audited, consolidated financial statements.

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Basis of Financial Statements and Business Activities

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), and include the accounts of United Parcel Service, Inc., and all of its consolidated subsidiaries (collectively "UPS" or the "Company").

All intercompany balances and transactions have been eliminated.

United Parcel Service, Inc., and all of its consolidated subsidiaries ("UPS"), is a global package delivery and logistics provider.

We manage our business and report operations through two reportable segments, U.S.

Domestic Package and International Package, which are together referred to as our global small package operations.

Our remaining businesses are reported as Supply Chain Solutions ("SCS").

We provide transportation services, primarily domestic and international letter, package and air cargo delivery.

Through our Supply Chain Solutions subsidiaries, we are also a global provider of transportation, logistics and related services.

In 2024, we reclassified certain operating expenses to better align with the manner in which we manage our operations.

These reclassifications were inconsequential and substantially all of these costs were previously classified within operating expenses as Purchased transportation and have now been classified within operating expenses within Other expenses in the statements of consolidated income.

The remaining line items within operating expenses and Other Income and (Expense) that were impacted by this reclassification were inconsequential.

As a result, the statements of consolidated income give effect to this reclassification as follows:

• Purchased transportation decreased by $ 11 and $ 9 million for 2023 and 2022, respectively.

• Other expenses increased by $ 7 and $ 5 million for 2023 and 2022, respectively.

The amounts for 2024 were not reported under this legacy basis but are also immaterial.

The reclassification had no impact on our reported revenue, operating profit, Other Income and (Expense) , net income, or any internal performance measure on which management is compensated.

Through our SCS subsidiaries, we are also a global provider of transportation, logistics and related services.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").

All intercompany balances and transactions have been eliminated.

The "Company," "we," "us" and "our" refer to UPS.

Unless the context indicates otherwise, whenever we refer in this report to a particular year, we mean our calendar year ended or ending December 31.

Use of Estimates

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Revenue Recognition

United States ("U.S.") Domestic Package and International Package Operations:

Revenue is recognized over time as we perform the services in the contract.

Freight forwarding revenue, and expenses related to the transportation of freight are recognized over time as we perform the services.

We account for a contract when both parties have approved the contract and are committed to perform their obligations, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the basis of revenue recognition.

The vast majority of our contracts with customers are for transportation services that include only one performance obligation;

the transportation services themselves.

If a contract contains more than one performance obligation, we allocate the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the services underlying each performance obligation.

In certain business units, such as Logistics, we sell customized, customer-specific solutions in which we integrate a complex set of tasks and components into a single capability that is accounted for as one performance obligation.

Satisfaction of Performance Obligations

We generally recognize revenue over time as we perform services in the contract because our customers receive the benefit of our services as goods are transported from one location to another.

Further, if we were unable to complete delivery to the final location, those services would not need to be re-performed.

We recognize revenue based on the extent of progress towards completion of our services.

We use the cost-to-cost measure of progress for our package delivery contracts because it best depicts the benefit received by the customer, which occurs as we incur costs on our contracts.

Under this measure, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the service.

Revenues, including ancillary or accessorial fees and reductions for estimated customer incentives, are recorded proportionally as costs are incurred.

Costs to fulfill include labor and other direct costs and an allocation of indirect costs.

Customs brokerage revenue is recognized upon completing documents necessary for customs entry purposes.

In our Logistics businesses we have a right to consideration from customers in an amount that corresponds directly with the value to the customers of our performance completed to date, and as such we recognize revenue in the amount to which we have a right to invoice the customer.

For our freight forwarding contracts, an output method of progress based on time-in-transit is utilized as the timing of costs incurred does not best depict the benefit to the customer.

In our Logistics business we have a right to consideration from

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customers in an amount that corresponds directly with the value to the customers of our performance completed to date;

therefore we recognize revenue in the amount to which we have a right to invoice the customer.

Variable Consideration

Our contracts commonly contain customer incentives, guaranteed service refunds or other provisions that can either increase or decrease the rates paid for services.

These variable amounts are generally dependent upon achievement of certain incentive tiers or performance metrics.

We record revenue, which may be reduced by incentives or other contract provisions, to the extent it is probable that a significant reversal of cumulative amounts recognized will not occur when the uncertainty associated with the variable consideration is resolved.

Our estimates of revenue are based on an assessment of anticipated customer spending and all information (historical, current and forecasted) that is reasonably available to us.

Contract Modifications

Contracts are often modified to account for changes in the rates we charge our customers or to add additional, distinct services.

We consider contract modifications to exist when the modification either creates new, or changes the existing, enforceable rights and obligations.

Contract modifications that add distinct goods or services are treated as separate contracts.

Contract modifications that do not add distinct goods or services typically change the price of existing services.

These contract modifications are accounted for prospectively as the remaining performance obligations are distinct.

Payment Terms

Under the typical payment terms of our customer contracts, customers pay at periodic intervals, which are generally seven days within our U.S.

Domestic Package business, for shipments included on invoices received.

Invoices are generated each week on the week-ending day.

It is not customary business practice to extend payment terms past 90 days and, as such, we do not have a practice of including a significant financing component within our contracts with customers.

Principal vs.

Agent Considerations

In our transportation businesses, we may utilize independent contractors and third-party carriers to perform transportation services.

We have determined that all our major businesses act as principal rather than agent within their revenue arrangements.

Consequently, revenue and the associated purchased transportation costs are reported on a gross basis within our statements of consolidated income.

Accounts Receivable, Net

Accounts receivable, net, include amounts billed and currently due from customers.

The amounts due are stated at their net estimated realizable value.

Losses on accounts receivable are recognized when reasonable and supportable forecasts affect the expected collectability.

This requires us to make our best estimate of the current expected losses inherent in our accounts receivable at each balance sheet date.

These estimates require consideration of historical loss experience, adjusted for current conditions, forward-looking indicators, trends in customer payment frequency, and judgments about the probable effects of relevant observable data, including present and future economic conditions and the financial health of specific customers and market sectors.

Our risk management process includes standards and policies for reviewing major account exposures and concentrations of risk.

Contract Assets and Liabilities

Contract assets include billed and unbilled amounts resulting from in-transit shipments, as we have an unconditional right to payment only when services have been completed (i.e., shipments have been delivered).

Amounts do not exceed their net realizable value.

Contract assets are generally classified as current and the full balance is converted each quarter based on the short-term nature of the transactions.

Contract liabilities consist of advance payments and billings in excess of revenue as well as deferred revenue.

Advance payments and billings in excess of revenue represent payments received from our customers that will be earned over the contract term.

Deferred revenue represents the amount due from customers related to in-transit shipments that has not yet been recognized as revenue based on our selected measure of progress.

We classify advance payments and billings in excess of revenue as either current or long-term, depending on the period over which the amount will be earned.

We classify deferred revenue as current based on the short-term nature of the transactions.

Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.

In order to determine revenue recognized in the

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period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that deferred revenue balance.

Cash and Cash Equivalents

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The carrying amount of these securities approximates fair value because of the short-term maturity of these instruments.

As of December 31, 2024, we did no t have any restricted cash.

As of December 31, 2023, we had $ 37 million of restricted cash that was primarily related to cash we had agreed to deposit in connection with a previously disclosed challenge by Italian tax authorities to the deductibility of Value Added Tax payments by UPS to certain third-party service providers.

We designated additional amounts as restricted cash during the first quarter of 2024 and, during the second quarter of 2024, we

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made a voluntary payment, including interest, of approximately $ 94 million to settle this matter and recorded a corresponding charge against income which is reflected in Other expenses in our statements of consolidated income.

As of December 31, 2025 and 2024, we did no t have any restricted cash.

Supplemental Cash Flow Information

The following table presents supplemental cash flow information (in millions):

2025 2024 2023

Cash paid during the year for:

Interest (net of amount capitalized) (1)

$ 990 $ 854 $ 762

Income taxes (net of refunds) 1,912 1,347 1,976

Operating cash flows from operating leases

Financing cash flows from finance leases

Noncash transactions:

Accrued capital expenditures $ 524 $ 227 $ 309

Property, plant and equipment recognized during the construction period of build-to-suit financing arrangement 107 — —

Right-of-use assets obtained in exchange for operating lease obligations

808 740 1,278

Right-of-use assets obtained in exchange for finance lease obligations (2)

(1) Includes $ 18 , $ 20 and $ 17 million of cash paid for interest on finance leases in 2025, 2024 and 2023, respectively.

(2) Includes $ 551 million related to new aircraft leases that commenced in 2025, which were accounted for as finance leases.

Marketable Securities and Non-Current Investments

Debt securities are classified as either trading or available-for-sale securities and are carried at fair value.

Unrealized gains and losses on trading securities are reported as Investment income (expense) and other on the statements of consolidated income.

Unrealized gains and losses on trading securities are reported as Investment income (expense) and other in our statements of consolidated income.

Unrealized gains and losses on available-for-sale securities are reported within other comprehensive income, a separate component of shareowners’ equity.

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We record the investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the net earnings or losses and other comprehensive income of the investee.

Gains and losses from equity method investments are reported in Investment income (expense) and other on the statements of consolidated income.

Gains and losses from equity method investments are reported in Investment income (expense) and other in our statements of consolidated income.

We record dividends or other equity distributions as reductions of the carrying value of the investment.

Equity method investments are included within Other Non-Current Assets in our consolidated balance sheets.

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Fuel and other materials and supplies are recognized as inventory when purchased, and then charged to expense when used in our operations.

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Property, plant and equipment are carried at cost less accumulated depreciation.

We evaluate the useful lives of our property, plant and equipment based on our usage, maintenance and replacement policies, and taking into account physical and economic factors that may affect the useful lives of the assets.

We evaluate the useful lives of our property, plant and equipment based on our usage, maintenance and replacement policies, and take into account physical and economic factors that may affect the useful lives of the assets.

Depreciation and amortization are provided by the straight-line method over the estimated useful lives of the assets, which are as follows:

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For substantially all of our aircraft, the costs of major airframe and engine overhauls, as well as routine maintenance and repairs, are charged to expense as incurred.

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Interest incurred during the construction of property, plant and equipment is capitalized until the underlying assets are placed in service, at which time amortization of the capitalized interest begins, straight-line, over the estimated useful lives of the related assets.

Capitalized interest was $ 121 and $ 118 million for the years ended December 31, 2024 and 2023, respectively.

Capitalized interest was $ 116 and $ 121 million in 2025 and 2024, respectively.

We monitor our property, plant and equipment for any indicators that the carrying value of our asset groups may not be recoverable, at which time we review the asset group for impairment based on undiscounted future cash flows.

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Refer to note 4 for a discussion of impairments of property, plant and equipment.

During the first quarter of 2025, we entered into an agreement in principle with our largest customer that will provide for a significant reduction in their volume.

In connection therewith, we will be reconfiguring our U.S.

network and expect this reconfiguration to lead to a reduction in the number of buildings, vehicles and aircraft in our network.

We are not yet able to identify the specific assets which will be impacted by these actions;

however, it is reasonably possible that revisions to our estimates of the useful life and salvage values of certain of our long-lived assets will accelerate depreciation expense and charges related to early retirements may be recognized during future periods.

In 2025, we entered into an agreement with our largest customer that provides for a significant reduction in their volume.

In connection therewith, we are reconfiguring our U.S.

network which have and will continue to lead to a consolidation of our facilities and workforce as well as end-to-end process redesign.

Revisions to our estimates of the useful life and salvage values of certain long-lived assets are likely to continue to result in accelerated depreciation expense and charges related to early retirements.

Refer to note 4 for additional information.

We recognize a right-of-use ("ROU") asset and lease obligation for all leases greater than twelve months, including reasonably certain renewal or purchase options.

Some of our leases contain both lease and non-lease components, which we have elected to treat as a single lease component.

Some of our leases contain both lease and non-lease components.

In 2025, we defined a new lease asset class, data centers, and elected to account for the lease and non-lease components separately.

For all other lease arrangements, we account for lease and non-lease components as a single lease component.

Lease costs for short-term leases are recognized on a straight-line basis over the lease term.

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Rather, changes to payments due to a change in an index or rate are recognized in our statements of consolidated income in the period of the change.

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When available, we use the rate implicit in the lease to discount lease payments;

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Goodwill and Intangible Assets

Costs of purchased businesses in excess of net identifiable assets acquired (goodwill) and indefinite-lived intangible assets are tested for impairment at least annually, unless changes in circumstances indicate an impairment may have occurred between annual tests.

Costs of purchased businesses in excess of net identifiable assets acquired (goodwill) and indefinite-lived intangible assets are tested for impairment at least annually, or more frequently, if circumstances indicate a potential impairment is present.

We complete our annual goodwill impairment evaluation as of July 1 on a reporting unit basis.

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If the qualitative assessment is not conclusive, or if we elect to bypass the qualitative test, we quantitatively assess the fair value of a reporting unit to test goodwill for impairment.

We assess the fair value of a reporting unit using a combination of discounted cash flow modeling and observable valuation multiples for comparable companies.

We assess the fair value of a reporting unit using a combination of a market and income approach.

Under the market approach, we use observable market data for comparable publicly-traded companies that correspond to the reporting unit to derive a market-based multiple.

Under the income approach, the fair value of the reporting unit is estimated based on discounted cash flow modeling.

Assumptions used in the discounted cash flow model include future revenue, costs, capital expenditures, working capital, long-term growth rates and the discount rate.

Our estimates are developed using assumptions that we believe are consistent with how a market participant would value our reporting units.

If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, we record the excess amount as goodwill impairment, not to exceed the total amount of goodwill allocated to the reporting unit.

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Finite-lived intangible assets, including trademarks, licenses, patents, customer lists, non-compete agreements and franchise rights are amortized on a straight-line basis over their estimated useful lives, which range from 2 to 21 years.

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Assets Held for Sale

We classify long-lived assets or disposal groups as held for sale in the period when all of the following conditions have been met:

• we have approved and committed to a plan to sell the assets or disposal group;

• the asset or disposal group is available for immediate sale in its present condition;

• an active program to locate a buyer and other actions required to complete the sale have been initiated;

• the sale of the asset or disposal group is probable and expected to be completed within one year;

• the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value;

• it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

We initially measure a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell and recognize any loss in the period in which the held for sale criteria are met.

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We cease depreciation and amortization of a long-lived asset, or assets within a disposal group, upon their designation as held for sale and subsequently assess fair value less any costs to sell at each reporting date until the asset or disposal group is no longer classified as held for sale.

See note 4 for additional information.

Supplier Finance Programs

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Amounts due to our suppliers that participate in the SCF program are included in Accounts payable in our consolidated balance sheets.

As of December 31, 2024 and 2023, suppliers sold $ 515 and $ 504 million, respectively, of our outstanding payment obligations to participating institutions.

We have been informed by the participating financial institutions that as of December 31, 2025 and 2024, suppliers sold $ 435 and $ 515 million, respectively, of our outstanding payment obligations to participating institutions.

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A rollforward of obligations confirmed and paid during the year is presented below (dollars in millions):

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Trends in actual experience are a significant factor in the determination of our reserves.

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In 2024, we transferred a portion of our workers' compensation liability related to policy years 1994 through 2000 and policy year 2018 to a third-party insurer.

We paid $ 114 million to transfer a portfolio of claims for which we carried reserves of $ 114 million.

In 2023, we transferred a portion of our workers' compensation liability related to policy years 2001 through 2006 and policy year 2017 to a third-party insurer.

We paid $ 151 million to transfer a portfolio of claims for which we carried reserves of $ 153 million, recognizing a pre-tax gain of $ 2 million that was recorded in Other expenses in the statement of consolidated income for the year ended December 31, 2023.

In 2025 and 2024, we transferred a portion of our workers' compensation liability related to policy years 1984 through 2000 and policy years 2018 and 2019 to a third-party insurer.

We paid $ 152 and $ 114 million in 2025 and 2024, respectively, to transfer a portfolio of claims for which we carried reserves of $ 152 and $ 114 million in 2025 and 2024, respectively.

We also sponsor a number of health and welfare insurance plans for our employees.

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Actuarial assumptions are reviewed on an annual basis, unless circumstances require an interim measurement of any of our plans.

We recognize changes in the fair value of plan assets and net actuarial gains or losses in excess of a corridor (defined as 10% of the greater of the fair value of plan assets or the plan's projected benefit obligation) in Investment income (expense) and other, in the statement of consolidated income, upon remeasurement of a plan.

We recognize changes in the fair value of plan assets and net actuarial gains or losses in excess of a corridor (defined as 10% of the greater of the fair value of plan assets or the plan's projected benefit obligation) in Investment income (expense) and other, in our statements of consolidated income, upon remeasurement of a plan.

The remaining components of pension expense, primarily service and interest costs and the expected return on plan assets, are recorded ratably on a quarterly basis.

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Valuation allowances are provided if it is more likely than not that a deferred tax asset will not be realized.

Our current accounting policy for releasing income tax effects from other comprehensive income is based on a portfolio approach.

We recognize liabilities for uncertain tax positions based on a two-step process.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any.

Once it is determined that the position meets the recognition threshold, the second step requires us to estimate and measure the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement.

Once it is determined that the position meets the recognition threshold, the second step requires us to estimate and measure the largest amount of tax

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benefit that is more likely than not to be realized upon ultimate settlement.

The difference between the amount of recognizable tax benefit and the total amount of tax benefit from positions filed or to be filed with the tax authorities is recorded as a liability for uncertain tax benefits.

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Such a change in recognition or measurement could result in the recognition of a tax benefit or an additional charge to the tax provision.

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Foreign Currency Translation and Remeasurement

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We have issued employee share-based awards under various incentive compensation plans that contain vesting conditions, including service conditions, where the awards cliff vest after one or three years or vest ratably over periods up to five years (the "nominal vesting period") or at the date the employee retires (as defined by the plan), if earlier.

As of December 31, 2023, we had no outstanding share-based awards cliff vesting after one year.

See note 13 for further discussion of our share-based awards.

Compensation cost is generally recognized immediately for certain awards granted to retirement-eligible employees, or over the period from the grant date to the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period.

For awards with a performance-based condition, expense is recognized based on probability of performance achievement.

For awards with a performance-based condition, expense is recognized based on probability of performance achievement and for awards with a market condition, expense includes the fair value at grant date.

We estimate forfeiture rates based on historical rates of forfeitures for awards with similar characteristics, historical and projected rates of employee turnover and the nature and terms of the vesting conditions of the awards.

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For those derivative instruments that are designated and qualify as hedging instruments, we designate the derivative as a cash flow hedge, a fair value hedge or a hedge of a net investment in a foreign operation based upon the exposure being hedged.

• A cash flow hedge refers to hedging the exposure to variability in expected future cash flows that is attributable to a particular risk.

For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is reported as a component of other comprehensive income, and reclassified into earnings in the period during which the hedged transaction affects earnings.

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• A cash flow hedge refers to hedging the exposure to variability in expected future cash flows that is attributable to a particular risk.

• A fair value hedge refers to hedging the exposure to changes in the fair value of an existing asset or liability that is attributable to a particular risk.

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Adoption of New Accounting Standards

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848), and in December 2022 subsequently issued ASU 2022-06, to temporarily ease the potential burden in accounting for reference rate reform.

As of December 31, 2023, we had transitioned our affected debt instruments and contracts to an alternative reference rate and, as a result, we did not elect to apply the practical expedients provided under Topic 848 to these transitions, and we did not observe any further impact as of December 31, 2024.

In November 2023, the FASB issued an ASU on segment reporting.

The standard requires new disclosures reconciling significant segment expenses to segment profit measures and additional qualitative information about how segment measures are used by management.

Effective December 31, 2024, we adopted this ASU retrospectively for all prior periods presented.

The adoption did not have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

See note 14 for our segment disclosures.

In December 2023, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosure, to enhance tax-related disclosures.

The ASU became effective for us in 2025 and, beginning with this annual reporting period, requires more standardized categories in the tax rate reconciliation and additional detail for significant tax items.

It also requires a breakdown of income taxes paid by jurisdiction exceeding 5% of total taxes and removes certain disclosure requirements for unremitted foreign earnings and uncertain tax positions.

We adopted this ASU prospectively.

The adoption did not have a material impact on our consolidated financial position, results of operations, cash flows, or internal controls.

See note 15 for additional information.

Other accounting pronouncements adopted during the periods covered by the consolidated financial statements did not have a material impact on our consolidated financial position, results of operations, cash flows or internal controls.

Accounting Standards Issued But Not Yet Effective

In December 2023, the FASB issued an ASU to enhance tax-related disclosures.

This update will require more standardized categories for tax rate reconciliation and additional detail for significant tax items.

It will also require a breakdown of income taxes paid by jurisdiction exceeding 5% of total taxes and remove certain disclosure requirements for unremitted foreign earnings and uncertain tax positions.

The standard becomes effective for us in the first quarter of 2025.

We are evaluating its impact on our financial statements, disclosures and internal controls but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

In November 2024, the FASB issued an ASU on expense disaggregation disclosures, which will require tabular disclosure in the notes to financial statements for specific expense categories.

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In July 2025, the FASB issued an ASU on measurement of credit losses for accounts receivable and contract assets, which introduces a practical expedient for estimating expected credit losses on eligible current assets.

The practical expedient permits entities to assume credit loss conditions existing at the balance sheet date will continue.

Adoption of the practical expedient is optional and, if adopted, would become effective for us beginning in the first quarter of 2026.

We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

In September 2025, the FASB issued an ASU on targeted improvements to the accounting for internal‑use software, which modernizes accounting guidance for costs incurred in developing internal-use software.

This ASU removes references to development stages, and instead requires capitalization to begin based on a "probable-to-complete" threshold.

This ASU becomes effective for us beginning with our 2028 annual report and for interim and annual periods thereafter, and early adoption is permitted.

We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

In December 2025, the FASB issued an ASU on accounting for government grants.

The ASU defines the scope of government grants and permits recognition only when it is probable that the entity will comply with the grant’s conditions and the grant will be received.

It also provides guidance on presentation approaches for both asset‑related and income‑related grants and expands related disclosure requirements.

This ASU becomes effective for us beginning in the first quarter of 2029 and for annual periods thereafter, and early adoption is permitted.

We are evaluating the impact of adoption, but do not expect this ASU to have a significant impact on our consolidated financial position, results of operations, cash flows or internal controls.

Other accounting pronouncements issued, but not effective until after December 31, 2025, are not expected to have a material impact on our consolidated financial position, results of operations, cash flows or internal controls.

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Disaggregation of Revenue

Year Ended December 31,

2025 2024 2023

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Cargo & Other

1,238 569 247

Domestic Package $ 59,519 $ 60,376 $ 60,205

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Other 1,795 1,569 1,461

Supply Chain Solutions $ 12,734 $ 12,922 $ 16,029

SCS $ 10,566 $ 12,734 $ 12,922

Consolidated revenue $ 88,661 $ 91,070 $ 90,958

As of the fourth quarter of 2024, based on a change in our management reporting structure, U.S.

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Refer to note 14 for further information.