The Second Cup Ltd. is Canadas largest specialty coffee caf franchisor (as measured by number of cafs)
Question:
In Exhibit 10-18:
EXCERPT FROM THE SECOND CUP LTD.’S 2013 ANNUAL REPORT
22. CONTINGENCIES, COMMITMENTS AND GUARANTEES
The Coffee “C” contract is the world benchmark for Arabica coffee. The contract prices physical delivery of exchange grade green beans from one of 19 countries of origin in a licensed warehouse to one of several ports in the U.S. and Europe, with stated premiums/discounts. Second Cup sources high altitude Arabica coffee which tends to trade at a premium above the “C” coffee commodity price. Second Cup has contracts with third party companies to purchase the coffee that is sold in all Second Cup cafés. In terms of these supply agreements, Second Cup has guaranteed a minimum volume of coffee purchases of $5,621 USD (2012 – $4,421 USD) during fiscal 2014. The coffee purchase commitment is comprised of three components: unapplied futures commitment contracts, fixed price physical contracts and at price physical contracts.
Required:
Explain this note in your own words. Be sure to discuss the financial statement impacts, if any, of this roasting contract and the financial statement impacts it will have in future years.
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Related Book For
Understanding Financial Accounting
ISBN: 978-1118849385
1st Canadian Edition
Authors: Christopher Burnley, Robert Hoskin, Maureen Fizzell, Donald
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