Commodity hedging

[ScottBonacker]

I have a question from a QuickBooks user about accounting for hedging activities, so I've registered here looking for a discussion of that. There may be something here that I didn't see for not knowing how to search the best way, and a suggestion of where to look would be appreciated.

Thanks,

Scott

[FlagshipTech]

We don't have anything on this site specifically related to setting up & using QuickBooks for commodity hedging activities, but:

The brokerage (margin) fund should normally be set up as an Other Current Asset account type.

You also need at least one income account for profits/losses, plus some expense account in which to post brokerage fees. If the brokerage account earns interest, it could be posted to any interest income account or you might want to set up a separate interest income subaccount for it.

The biggest problem, in my opinion, is that many people want to be able to print a Balance Sheet from QuickBooks which matches the number on their monthly brokerage account summary. For most farmers this is a problem, simply because most are using cash basis accounting--they can't realistically reflect a "paper" profit or loss position, but need to wait until the futures or options position is offset (closed out) to record the net profit or loss on the hedge.

My knowledge is not current with respect to any IRS documentation required for hedges (as opposed to speculative positions) when filing taxes. Also, I believe the Financial Accounting Standards board has one or more papers published related to accounting for hedges...but I haven't read them.

What information are you looking for, specifically?

Mark Wilsdorf
Flagship Technologies, Inc.
QuickBooks™ Add-Ons and Solutions You Can Use
http://www.goflagship.com

[ScottBonacker]

I'm trying to answer a question over here -

http://www.quickbooksgroup.com/webx/?13@125.6XMNe9bKVWY@.59b768d6/2

Scott

[FlagshipTech]

We look in on those forums from time to time, and will make an effort to follow your posts there...but I think you'll find that there's little message traffic on that forum. (If you post there, no one might reply for a week or more.)

If you want a good discussion and quick answers to QuickBooks accounting questions, a much better place to post them is in the Forums area at QuickBooksUsers.com:

http://forums.quickbooksusers.com/

This site is not run by Intuit and is, in my opinion, the best place to get accounting-related QuickBooks questions answered anywhere on the Web. It has a high level of daily message traffic, and several CPAs and QuickBooks Pro Advisors are daily posters. We try to scan all new posts there, every day, if time allows.

By the way, Intuit's posting rules for the site you mentioned are quite strict unless they've changed recently. They severely limit or prevent discussion of most non-Intuit products--even products which are directly pertinent to the original poster's question. As such, they greatly curtail the free flow of useful information compared with the forums I mention above


Mark Wilsdorf
Flagship Technologies, Inc.
QuickBooks™ Add-Ons and Solutions You Can Use
http://www.goflagship.com

[ScottBonacker]

Thanks for reminding me about quickbooksusers. I had registered there in January, but forgot about it. I'm also on one of the Yahoo groups that has a lot of activity.

I think it has something to do with the forum design - the Intuit sponsored site works best with a faster connection than I have sometimes. And the search functions aren't real strong. It encourages hit-and-run questions more than the Yahoo design does.

You and quickbooksusers both use the same forum software but I am new to it so don't have a comparison yet.

In any case, thanks again. If that user in Ohio with the question provides some example hedging statements I'll try to help her, but from the clues she offered and applying what you pointed out earlier she'll end up with a hybrid accounting system. Sometimes, that's what they want.

I'll agree with you on the mentions of third-party products, but from my perspective that is intended to keep it more of a question-answer forum than a marketing forum. Links in the profiles or links in a message to a generic third-party-solutions roster are OK, while self-promotion within a message are discouraged.

Scott Bonacker CPA
Springfield, MO

[FlagshipTech]

Scott,

>I'll agree with you on the mentions of third-party products, but from my perspective that is intended to keep it more of a question-answer forum than a marketing forum.

If you compare Intuit's forums with those at QuickBooksUsers.com I think you'll find that, on balance, there's a better flow of information on a broader range of questions at QuickBooksUsers.com...and with almost no self-promotion except in cases where it's appropriate in directly responding to someone's question. That's as it should be; otherwise, we're stopping short of allowing in all the information available for solving someone's problem.

Forum operators all walk a fine line in trying to keep forums balanced between free-flowing information and spam.