Where in the FASB Codification would I find the accounting treatment for a cancelled contract in a business combination?
In this case, Company X was in a contract with Company Z, who served as their exclusive supplier for a raw material used in Company X's manufacturing. This contract stipulates that the contract may be cancelled anytime for a cancellation fee paid by Company X. The owner of Company Z is Mr. Z, who also serves as the sole shareholder of Company Y (owns 100% of their outstanding common stock). Company X is acquiring Company Y, and Company Z is not involved in this transaction since it is a separate entity. However, the acquisition transaction contract states that Company X's contract with Company Z will be cancelled effective immediately with this deal and the cancellation fee will be waived.