v3.26.1
DERIVATIVES AND HEDGING ACTIVITIES
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES AND HEDGING ACTIVITIES DERIVATIVES AND HEDGING ACTIVITIES
As a multinational company, International Paper is exposed to market risks, such as changes in interest rates, currency exchange rates and commodity prices.

International Paper periodically uses derivatives and other financial instruments to hedge exposures to interest rate, commodity and currency risks. International Paper does not hold or issue financial instruments for trading purposes. For hedges that meet the hedge accounting criteria at inception, International Paper formally designates and documents the instrument as a fair value hedge, a cash flow hedge or a net investment hedge of a specific underlying exposure.

The notional amounts of financial instruments used in hedging transactions were as follows:

In millionsMarch 31, 2026December 31, 2025
Electricity contracts (MWh)1.6 1.9 
Natural gas contracts (MWh)9.2 12.1 
Carbon credit contracts (tons)0.2 0.1 
External debt (EUR)€2,725 €3,293 

The following table shows gains or losses recognized in AOCL, net of tax, related to derivative instruments: 

 Gain (Loss) Recognized in AOCL on Derivatives
 Three Months Ended
March 31,
In millions20262025
Derivatives in Cash Flow Hedging Relationships:
Commodity contracts$137 $(52)
Derivatives in Net Investment Hedging Relationships:
External debt$22 $8 

Based on our valuation at March 31, 2026, and assuming market rates remain constant through contract maturities, we expect transfers to earnings of the existing gain or losses reported in AOCL on cash flow hedges during the next 12 months to correspond with the current assets and liabilities portion of the derivative as disclosed below.

The amounts of gains and losses recognized in the statement of operations on financial instruments used in hedging transactions were as follows:

 Gain (Loss) Reclassified from AOCL Into Income Location of Gain (Loss)
Reclassified from AOCL
Three Months Ended
March 31,
In millions20262025
Derivatives in Cash Flow Hedging Relationships:
Commodity contracts$(1)$1 Cost of products sold
 Gain (Loss) Recognized in IncomeLocation of Gain (Loss)
In Statement
of Operations
Three Months Ended
March 31,
In millions20262025
Derivatives in Cash Flow Hedging Relationships:
Commodity contracts$3 $5 Cost of products sold
Derivatives Not Designated as Hedging Instruments:
Commodity contracts$(18)$(6)Cost of products sold

Fair Value Measurements

The Company has not changed its valuation techniques for measuring the fair value of any financial assets or liabilities during the year. Transfers between levels, if any, are recognized at the end of the reporting period. International Paper’s derivatives are classified as Level 2 within the fair value hierarchy. Fair value hierarchies are further defined in Note 1 in the Company’s Annual Report.

The following table provides a summary of the impact of our derivative instruments in the balance sheet:
 
AssetsLiabilities
In millionsMarch 31, 2026December 31, 2025March 31, 2026December 31, 2025
Derivatives designated as hedging instruments
Commodity contracts – cash flow$50 $2 $2 $63 
Derivatives not designated as hedging instruments
Commodity contracts174 67 83 27 
Total derivatives$224 (a)$69 (b)$85 (c)$90 (d)
 
(a)Includes $164 million recorded in Other current assets and $60 million recorded in Deferred charges and other assets in the accompanying condensed consolidated balance sheet.
(b)Includes $47 million recorded in Other current assets and $22 million recorded in Deferred charges and other assets in the accompanying condensed consolidated balance sheet.
(c)Includes $72 million recorded in Other current liabilities and $13 million recorded in Other liabilities in the accompanying condensed consolidated balance sheet.
(d)Includes $73 million recorded in Other current liabilities and $17 million recorded in Other liabilities in the accompanying condensed consolidated balance sheet.

The above contracts are subject to enforceable master netting arrangements that provide rights of offset with each counterparty when amounts are payable on the same date in the same currency or in the case of certain specified defaults. Management has made an accounting policy election to not offset the fair value of recognized derivative assets and derivative liabilities in the balance sheet. The amounts owed to the counterparties and owed to the Company are considered immaterial with respect to each counterparty and in the aggregate with all counterparties.