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.)