The increased volatility of commodity markets and the rapidly evolving corporate governance and financial reporting environments place additional demands on risk management and financial reporting. Integrating the two into a single view of risks and results is the challenge facing commodity companies and their stakeholders.
In re-issuing this guide, our ambition is to support the need for a better understanding of how trading commodities works; to unveil some of the activities, often misunderstood, but used by traders to manage risk and to explain how the financial results of these activities are put together and reported.
This publication provides you with insights in topics such as:
• How the commodity trading industry is evolving
• The basics of commodity markets
• The elements of risk management
• Aspects of the financial statements that are unique for commodity trading companies
• How to recognize and measure transactions and commodity inventory positions
• How to apply fair value accounting for external reporting
• The specific requirements for derecognition of assets