Acct540 Week 7 Case Study

Topics: International Financial Reporting Standards, Financial Accounting Standards Board, International Accounting Standards Board Pages: 3 (1014 words) Published: August 25, 2013
2013
Results for Thomas Foods

2013
Results for Thomas Foods

This report discusses the issues that Thomas Foods wants researched with examples of how Hedge Accounting could potentially benefit their company. Give examples of hedge accounting usage and if warranted develop a strategy to help the current Controller as well as future personnel properly account hedging assets.

This report discusses the issues that Thomas Foods wants researched with examples of how Hedge Accounting could potentially benefit their company. Give examples of hedge accounting usage and if warranted develop a strategy to help the current Controller as well as future personnel properly account hedging assets.

FACTS:
The goal of Thomas Foods is to neutralize large increases on produce prices from local farmers. The areas that can affect the costs unexpectedly mainly reside in extreme fluctuations of weather. Thomas Foods is interested in deciphering whether or not hedge accounting would be the ideal form of accounting. There are two forms of hedge accounting. The first is cash flow hedge accounting. The second is fair value hedge accounting practices (Hofstrand & Wisner, 2011). Thomas Foods needs to be able to buy from local farmers and still make a profit when selling to merchants across the US. ISSUES:

1. Whether hedge accounting can benefit Thomas Foods monetarily on produce purchases from local farmers (Hofstrand & Wisner, 2011). 2. Provide examples of hedging strategies or alternative method and explain the impact to operating income to ensure minimal loss (AASB Board Members, 2010). 3. Clearly define and explain using examples on the accounting side to Thomas Foods current Controller (International Accounting Standards Board, 2008). CONCLUSIONS:

1. Hedge accounting works best with transactions from original source such as the farmer (Hofstrand & Wisner, 2011). 2. Utilizing the use of a Purchase Order system will best benefit...

Bibliography: FASB ASC 815-20-55 Derivatives and Hedging - Hedging General - Implementation Guidnace, (June 2, 2013).
FASB ASC 815-45-55 Derivatives and Hedging - Weather Derivatives - Implementation Guidance and Illustrations, (June 2, 2013).
AASB Board Members. (2010, December 8). Hedge Accounting. Retrieved June 2, 2013, from Australian Accounting Standards Board: http://www.aasb.gov.au/admin/file/content102/c3/Dec_2010_AP_6.3_Hedging_changes_AASB_8_Dec_2010.pdf
Hofstrand, D., & Wisner, B. (2011, November). Grain Price Hedging Basics. Retrieved June 9, 2013, from Iowa State University: http://www.extension.iastate.edu/agdm/crops/html/a2-60.html
IFRS Board. (2013, May 23). Phase III: Hedge Accounting. Retrieved June 01, 2013, from International Financial Reporting Standards: http://www.ifrs.org/Current-Projects/IASB-Projects/Financial-Instruments-A-Replacement-of-IAS-39-Financial-Instruments-Recognitio/Phase-III-Hedge-accounting/Pages/Phase-III-Hedge-accounting.aspx
International Accounting Standards Board. (2008, March). Discussion Paper - Reducing Complexity in Reporting Financial Instruments. London, United Kingdom.
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