Accounting for Potential IEEPA Tariff Refunds: Financial Reporting Considerations for Businesses

Navigating the Financial Statement Impact of Tariff Refunds

Businesses that paid tariffs under the International Emergency Economic Powers Act (IEEPA) may need to consider how potential refunds affect their financial statements.

In February 2026, the U.S. Supreme Court ruled that IEEPA does not provide the executive branch with authority to impose tariffs. Following the ruling, U.S. Customs and Border Protection (CBP) began a process to refund tariffs collected under IEEPA, although appeals have also been filed.

In September 2026, the AICPA issued Technical Questions and Answers (TQAs) 7700.01-.05, Accounting Considerations for Mandated Refunds of IEEPA Tariffs, providing nonauthoritative guidance on the recognition, presentation and disclosure of potential tariff refunds.

For manufacturers, distributors, retailers, and other businesses that import goods into the United States, the guidance may have important financial reporting implications.

Start With the Importer of Record

An important first step is determining which entity is legally entitled to the refund.

Direct recoveries from CBP are limited to the importer of record, generally the party responsible for filing the entry with CBP and for the accuracy of declarations, classifications, valuations, and payment of duties and taxes.

Other businesses may have contractual or other rights to recover tariff costs that were passed through to them. However, the AICPA’s TQA guidance specifically addresses the accounting considerations for importers of record.

When Should a Potential Tariff Refund Be Recognized?

U.S. GAAP does not provide explicit guidance for refunds of tariffs subsequently determined to be invalid. As a result, the AICPA indicates that businesses should make an accounting policy election, select an acceptable approach and apply that approach consistently.

The guidance identifies two potential models:

1. Loss Recovery Model

Under this approach, a business applies the cost recovery guidance in ASC 410-30 by analogy, together with the loss contingency concepts in ASC 450-20. An asset may be recognized, up to the amount of previously recognized tariff costs, when receipt of the refund is probable and the amount can be reasonably estimated.

The assessment of whether recovery is probable requires consideration of all known facts and circumstances. Importantly, ASC 410-30 provides a rebuttable presumption that realization of a claim subject to litigation is not probable. Businesses should therefore consider relevant court decisions, appeals and other developments when determining whether the recognition threshold has been met.

2. Gain Contingency Model

Alternatively, a business may apply ASC 450-30, Gain Contingencies. Under this approach, an asset for an anticipated IEEPA tariff refund is recognized when the refund is realized or realizable.

Because these approaches have different recognition thresholds, the accounting policy selected can affect the timing of when a potential refund appears in the financial statements. Management should carefully evaluate and document its selected approach and apply it consistently.

How Should a Tariff Refund Be Presented?

Once a refund qualifies for recognition or is received, the financial statement presentation generally should follow how the original tariff cost was accounted for.

For example, if tariff costs remain capitalized in inventory, property and equipment or another asset on the balance sheet, the recognized refund associated with those costs would generally reduce the carrying amount of that asset.

If the tariff costs were previously recognized in earnings, such as through cost of sales, the refund would generally reduce the amount reported in the same expense category.

For businesses with significant tariff activity, this may require reviewing historical purchasing, inventory and fixed asset records to determine where tariff costs were originally recorded. If material, businesses should also disclose their accounting policy and the amounts and financial statement line items in which tariff refunds were recognized.

Consider Potential Refunds to Customers

Businesses should also determine whether they will ultimately retain the full benefit of a tariff recovery.

Contractual terms, legal requirements or even established business practices may create an obligation to return some or all of a tariff refund to customers. Determining whether such an obligation exists may require judgment and consultation with legal counsel.

Depending on the circumstances, businesses may need to consider several provisions of ASC 606, Revenue From Contracts With Customers, including:

• Variable consideration
• Consideration payable to a customer
• Contract modifications
• Refund liabilities

For example, if a business received consideration from a customer and expects to refund some or all of that amount, ASC 606 may require recognition of a refund liability. That liability should be reassessed at each reporting date as circumstances change.

Don’t Overlook Financial Statement Disclosures

Even when the accounting treatment has been determined, businesses should consider whether additional financial statement disclosures are necessary.

The appropriate disclosures will depend on the accounting model selected and the significance of the potential refund. Relevant guidance may include ASC 410-30 for entities applying the loss recovery model or ASC 450-30 for entities applying the gain contingency model.

Businesses should also consider:

ASC 275, Risks and Uncertainties. Ongoing developments surrounding IEEPA tariff refunds may create uncertainties that warrant disclosure based on their nature, duration and potential financial statement impact.

ASC 606, Revenue From Contracts With Customers. Additional disclosures may be appropriate when a business has potential obligations to refund tariff-related amounts to customers.

ASC 855, Subsequent Events. Developments occurring after the reporting period but before interim or annual financial statements are issued should be evaluated to determine whether they affect recognition or require disclosure.

Because the legal and administrative landscape may continue to change, businesses should monitor developments through the date their financial statements are issued.

Assess the Impact on Your Financial Statements

The accounting for potential IEEPA tariff refunds will depend on each business’s specific facts and circumstances, including its accounting policy, the original treatment of tariff costs, the status of potential recoveries and any obligations to customers.

As year-end approaches, businesses with significant IEEPA tariff exposure should work with their accounting and legal advisors to evaluate these considerations and monitor developments that could affect their conclusions.

Businesses should also distinguish tariffs imposed under IEEPA from tariffs imposed under other statutory authorities, as the accounting analysis discussed in the AICPA guidance specifically relates to refunds of IEEPA tariffs.

Keiter’s accounting and advisory professionals can help you evaluate how potential IEEPA tariff refunds may affect your financial statements and determine the appropriate recognition, presentation, and disclosure considerations for your business. Contact your Keiter Opportunity Advisor | Email | 804.747.0000

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