The revenue recognition policy of Imperial Metals Corporation, a Canadian gold and copper mining company, is as follows, from Note 1 to its 2009 financial statements:
Estimated mineral revenue, based upon prevailing metal prices, is recorded in the financial statements when title to the concentrate transfers to the customer which generally occurs on date of shipment. Revenue is recorded in the statement of income net of treatment and refining costs paid to counterparties under terms of the off take arrangements. The estimated revenue is recorded based on metal prices and exchange rates on the date of shipment and is adjusted at each balance sheet date to the date of settlement metal prices. The actual amounts will be reflected in revenue upon final settlement, which is usually four to five months after the date of shipment. These adjustments reflect changes in metal prices and changes in quantities arising from final weight and assay calculations.
Required:
a. Describe Imperial Metals' revenue recognition method. Explain why this method conforms with the IFRS criteria for revenue recognition. Include consideration of the treatment of estimated revenues and settlement adjustments (adjustments caused by changes in metal prices and changes in quantities arising from final weight and assay calculations).
b. What alternative revenue recognition policies and recording could Imperial Metals use that would also conform with IFRS?