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When buying out a competitor's contract.

The company I work for recently bought out a competitor's contract that sells a certain specialty product to a customer. The competitor was paid a specific amount per unit, for the remaining undelivered units in the contract. That piece was treated as Pre-paid. We are now ready to start shipping product to the customer and the question is whether to recognize the pro rata share of the contract buy out as a reduction of revenue or as cost of sales. We want to make sure the correct gross margin percentage is captured. Is there any specific pronouncement that covers these type of arrangement? Any suggestion for what the correct accounting is? Thanks


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