Determine how farmers would account for the hedge

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Reference no: EM132072165

Question: Research and explain in detail the role of derivatives in the 2008 financial crisis. You must use multiple sources. For sources you may use articles and/or podcasts.

For this question, use your Coffee Inventory Management under LIFO at Farmer Brothers Coffee Company case.

Required: Under commodity price risk (see footnotes), Farmer Brothers mentioned that "from time to time, it holds a mixture of futures contracts and options to hedge against volatility in green coffee prices." How would Farmers account for its coffee futures contracts? Explain.

Start by defining a coffee futures contract.

Next, identify, using the FASB codification, the type of hedge it would be-cash flow hedge or fair value hedge.

Finally, use the FASB ASC to determine how Farmers would account for the hedge, assuming it is considered an effective hedge.)

Reference no: EM132072165

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