Tariffs Continue to Shift. Is Your Financial Reporting Keeping Pace?

The conversation around tariffs changed dramatically in 2026.

The year began with a landmark Supreme Court ruling that found tariffs imposed under the International Emergency Economic Powers Act (IEEPA) in 2025 were not authorized under the statute. In February 2026, the U.S. Court of International Trade ordered refunds of certain tariffs, adding another layer of complexity for businesses as they try to determine which tariffs are refundable as well as how to apply for the refund.

In summary, companies that served as the importer of record on entries made between February 2025 and February 24, 2026, can apply to U.S. Customs for a refund on IEEPA duties paid. Downstream buyers who were contractually required to absorb tariff costs cannot receive tariff refunds directly from U.S. Customs; however, they can still recover their share through legal and contractual rights with their suppliers.

Throughout this year, many organizations have been asking the same questions:

• What does this mean for our financial statements?
• How do we determine the refund potential?

It’s Not Just About Tariffs, It’s About Uncertainty

Rapidly changing trade policies can affect the assumptions that underpin your financial statements. As conditions evolve, businesses should evaluate whether changes in profitability, future cash flows, or business strategy require updates to accounting estimates, tax positions, or financial statement disclosures.

Companies are asking when they should record the tariff refund – and where the refund should be recorded on the income statement.

While there is no specific accounting guidance related to tariffs, companies should consider whether they have a legal right to the refund. If so, the guidance for loss recovery (ASC 410) and gain contingency (ASC 450) can be applied. Under the loss recovery guidance, a refund would be recorded if it is probable; under the gain contingency guidance, the refund would be recorded when it is realized or realizable. With the tariffs, this would be when U.S. Customs has confirmed the refund or cash has been received.

Tariffs were part of the purchase cost. Therefore, any refunds should be recorded as a reduction of the asset purchased, or if the asset has already been sold, a reduction of cost of sales.

Don’t Forget Financial Statement Disclosures

Even when the accounting treatment itself doesn’t change, disclosures may.

Companies should evaluate whether evolving tariff developments, legal uncertainty, or significant changes in estimates warrant additional discussion in the notes to the financial statements. Investors, lenders, and other stakeholders expect transparency around the judgments and assumptions management is making in an uncertain environment.

Thoughtful disclosures can provide important context while demonstrating that management is actively monitoring changing conditions.

Downstream Impact

Companies need to consider their obligation to customers for tariffs that were passed on to them as well as any rights to refunds for tariffs paid to vendors.

Entities should first review contracts to see the obligation to reimburse customers and the right to receive refunds from vendors. The right to refunds may not be explicitly stated in the contract, but if the tariff was broken out separately on an invoice, customers may reasonably assume they are owed a refund. Companies should record a tariff liability to customers at the same time a refund from U.S. Customs is recorded. These refunds should be recorded as a reduction of revenue under ASC 606.

As with customers, companies should also evaluate whether their contracts with vendors provide either explicitly or implicitly for a refund. Refunds should be recorded once an agreement has been reached with the vendor and amounts have been verified, in accordance with gain contingency guidance by the vendor.

Still Wondering What to Do Midyear?

It is not too late to go after refunds. Depending on how the tariffs were originally recorded, determining the amounts owed can be a time-consuming process – but one that could be significant and worth the effort.

Staying Ahead of Change

The tariff landscape has shifted several times in the past two years and already this year, with further developments likely. Whether future changes come through the courts, new legislation, or additional trade actions, businesses should be prepared to evaluate their impact on financial reporting—not just operations.

In an environment where the rules continue to evolve, staying informed is only part of the equation. Understanding how those changes affect your financial statements is what ultimately supports better business decisions.

At Insero, we encourage organizations to take a proactive approach to an evolving tariff landscape. By regularly reassessing accounting estimates, tax considerations, and financial reporting assumptions, businesses can respond more confidently to changing conditions and reduce the risk of surprises at quarter-end or year-end.

Whether you need assistance evaluating refund eligibility, gathering supporting documentation, updating financial models, or reviewing tariff-related contract language, Insero is here to provide the technical expertise and genuine care that have defined our practice for more than 50 years. Contact us today.