Commodity Futures Contract (Speculative — Mark-to-Market Through P&L)
Recording daily mark-to-market gains and losses on commodity futures contracts not designated as hedges — all fair value changes flow directly through profit or loss.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Futures Contract Asset / (Liability) | Asset (+) or Liability (+) | 1,500.00 | - |
| Gain / (Loss) on Commodity Futures — P&L | Revenue (+) / Expense (+) | - | 1,500.00 |
💡 Accountant's Note
Agricultural cooperatives, trading arms of large farm operations, or agribusinesses may hold commodity futures (corn, soybeans, palm oil, cocoa) for speculative purposes or because they have not met the hedge accounting documentation requirements. Under IFRS 9 / ASC 815, derivatives not designated as hedges are measured at fair value through profit or loss (FVTPL) at every reporting date. Daily margin calls (variation margin) from the futures exchange also create cash flows that must be tracked. The P&L volatility from unhedged futures can be substantial — a 5% move in corn prices on $10M notional creates $500K of P&L exposure.
Practitioner & Systems Framework
💻 ERP Architecture
Daily settlement prices from the exchange (CME, ICE, Euronext) should feed directly into the treasury system for automatic mark-to-market. Margin deposits (initial margin posted with the broker) are recorded as restricted cash, not expense.
⚠️ Audit Flags
(1) All derivatives must be recognized on the balance sheet — off-balance-sheet treatment is not permitted. (2) Is the fair value (exchange settlement price) verifiable independently? (3) Are margin deposits correctly classified as restricted cash rather than as assets netted against the derivative?
📄 Required Documentation
Broker statements (daily settlement prices), margin account statements, exchange contract specifications, treasury system reports, and trader mandate/authorization documentation.
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