Quebec Super cheese Company (QSC) produces many varieties of cheese that are sold in every province in Canada, mainly through large grocery stores and specialty cheese shops. The cheese is produced at its factory in Montreal and shipped across Canada using commercial refrigerated trucks that pick up the cheese at the factory loading dock. The purchasers pay for the trucking and assume responsibility for the cheese as soon as the trucks pick it up at the factory. In accordance with IFRS, QSC recognizes the sale as soon as the trucks load the cheese, because the purchasers have title and responsibility for the cheese at this point.
QSC is not happy with these arrangements because it has received many complaints from purchasers about spoilage. Even though the purchasers and their truckers have full responsibility for this spoilage, many disputes have occurred because the truckers insist the cheese is spoiled when they pick it up. QSC is considering setting up its own feet of trucks to deliver its cheese across Canada. It estimates that the additional freight costs can be regained through the higher prices it would charge for including shipping in the price. If the company makes the deliveries, the title to the cheese will not transfer until the cheese is delivered.
Required:
Respond to the president’s concerns about the impact of changing the point at which the company recognizes revenue.