Quebec Supercheese 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. All cheese is shipped F.O.B. shipping point, meaning that 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, as 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 fleet 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 (F.O.B. destination).

If the company makes the deliveries, the title to the cheese will not transfer until the cheese is delivered. QSC's president was not happy when she learned that sales would be recognized and recorded only upon delivery to the customer, since she knew that an average of five days' sales are in transit at all times because of the distances involved. One day's sales total approximately $100,000 on average. The effect of this change would be an apparent drop in sales of $500,000 and a $50,000 decrease in net income in the year of the change.

Required:

a. Advise the president about revenue recognition guidelines.

b. Do you see a solution that could change the shipping method while avoiding the resulting effect on the income statement?