Accounting Considerations Related to the Supreme Court’s Ruling on Tariffs (February 27, 2026; Updated April 1, 2026)

Accounting Considerations Related to the Supreme Court’s Ruling on Tariffs

This Heads Up was updated on April 1, 2026, to reflect events that have occurred since the initial issuance of this publication and to provide expanded accounting considerations related to expected IEEPA tariff refunds, potential impacts of IEEPA tariff refunds on contracts with customers, and other matters.

Background

Since February 2025, President Trump has issued executive orders that impose tariffs on imports from several countries. These have included tariffs levied at various rates under the International Emergency Economic Powers Act (IEEPA).

In response to the executive orders, a group of states and small businesses sued the Trump administration, arguing that the president did not have authority under IEEPA to impose broad tariffs. Lower courts agreed and ruled for the plaintiffs in two separate cases in May 2025. The rulings were upheld on appeal. In September 2025, the Trump administration asked the Supreme Court to hear its appeal of the consolidated case on an expedited basis, and in November 2025, the Supreme Court heard oral arguments. On February 20, 2026, the Court ruled in a 6-3 decision that IEEPA does not authorize the president to impose tariffs. The majority opinion did not address tariff refunds. Consequently, there is uncertainty associated with an entity’s ability to obtain a refund and the process for trying to do so. Trade officials in the Trump administration have indicated they need guidance on refunds from the Court of International Trade (CIT).

Accounting considerations related to the Supreme Court’s ruling are discussed below. For a discussion of accounting and financial reporting considerations associated with assessing the practical effects of tariffs on an entity, see Deloitte’s August 13, 2025, Accounting Spotlight.

[Added April 1, 2026]

On March 4, 2026, the CIT ruled that U.S. Customs and Border Protection (CBP) must refund IEEPA tariffs that were collected and cease collection of IEEPA tariffs for entries that have not yet been liquidated. On March 6, 2026, CBP filed a declaration with the CIT saying that it was unable to immediately comply with the order because its systems need to be updated to handle the volume of refunds. CBP indicated that it is building infrastructure to facilitate electronic processing and payment (via ACH) of IEEPA tariff refunds. In response, the CIT temporarily paused the March 4, 2026, refund order, and CBP has been providing the CIT with periodic progress updates.

Accounting Considerations

Recognition and Measurement of Anticipated Refunds

If, before the ruling, an entity recognized costs attributable to tariffs (e.g., expensed them as period costs, capitalized them into fixed assets and subsequently recognized them in depreciation, or capitalized them into inventory and subsequently recognized them in cost of sales), we believe that the entity can apply the principles of the loss recovery model in ASC 410-301 by analogy to determine whether it may recognize and measure any tariff refunds. Although ASC 410-30 addresses environmental matters, we believe that it generally applies to recoveries of prior costs or losses. Therefore, an entity could apply the principles in ASC 410-30-35-8 through 35-10 to determine the appropriate recognition and measurement.

In determining whether an asset can be recognized for any potential tariff refund proceeds, an entity must compare the amount of the probable proceeds with the related previously recognized cost, if any. That is, a recognized asset is limited to the amount of previously recognized tariff costs, and recovery must be probable.

When assessing whether a recovery is probable, an entity applies the loss contingency model in ASC 450-20. For an entity to recognize a loss contingency under ASC 450-20, it must be probable that one or more future events will occur or fail to occur. In accordance with the ASC 450-20 glossary, a future event or events are “probable” if they are “likely to occur.” While the glossary definition provides no quantitative thresholds, “probable” does not imply virtual certainty under the loss contingency model. Given the current lack of clarity related to the process by which an entity may pursue tariff refunds and whether there will be legal challenges to requested refunds, there is uncertainty associated with whether an entity will be able to obtain or record an asset for such refunds. To determine whether recognition is appropriate, entities should analyze all relevant internal and external evidence, including:

The nature and complexity of the refund process — Even if a formal refund process exists, recovery may be contingent on the completion of specific procedural steps (e.g., filing protests, petitions, or claims) and the submission of supporting documentation within prescribed timeframes. Eligibility criteria may also narrow the population of entities entitled to a refund, and an entity’s conclusion about its eligibility may need to be evaluated by legal counsel. Further, a currently unclear refund process may preclude a conclusion that recovery is probable (i.e., an entity would seemingly be unable to assert that compliance with an unknown process is probable). Although the ruling did not address the process by which an entity may pursue tariff refunds, the Supreme Court remanded the case to the CIT, which will decide on whether and, if so, how such refunds will be processed.
Management’s decision related to how it intends to pursue a refund — On the basis of management’s evaluation of the expected costs, timing, operational burden, and likelihood of success relative to the potential recovery, an entity may be hesitant to pursue a refund or may elect to discontinue efforts during the process.

If recognition is not appropriate, no loss recovery is recorded unless recovery becomes probable. A conclusion that a potential recovery is probable may involve significant judgment and should be based on all relevant facts and circumstances.

[Added April 1, 2026]

Probability Considerations Under the Loss Recovery Model

An entity should continue to consider all facts and circumstances, including any present lack of clarity related to the exact CBP refund process, to determine whether recovery is probable. If recovery is not probable, an asset cannot be recognized.

Loss Recovery Versus Cost Recovery

The loss recovery model focuses by analogy to ASC 410-30 on the recovery of costs that have been recognized in earnings. Entities applying that model to potential tariff refunds may question whether a refund asset can be recognized for IEEPA tariff costs that have not been recognized in earnings (e.g., costs capitalized into fixed assets that have not been depreciated, or costs capitalized into inventory that have not been recognized in cost of sales). We believe that it is acceptable, as an accounting policy, for an entity to do either of the following:

Recognize an asset only for costs recognized in earnings, with an equivalent adjustment to the relevant expense (e.g., current-period offset to depreciation expense or cost of sales).
In addition to recognizing an asset for tariff costs recognized as expense, recognize an asset for costs not yet recognized in earnings, with an equivalent adjustment to the relevant balance (e.g., reduction of fixed assets or inventory).

It may be appropriate for entities to consider their existing inventory capitalization policies and the application of ASC 705-20 to the recognition of amounts receivable from vendors or suppliers. For example, an entity may have capitalized tariffs as part of inventory. If that inventory remains on hand at the time the entity concludes that it is appropriate to record a tariff refund asset, it would be reasonable for the entity to reduce the carrying amount of the on-hand inventory by the amount that was previously capitalized for tariffs paid (if the amounts paid are included in the measurement of the tariff refund asset).

Gain Contingency

There has been continued debate about acceptable models for recognizing tariff refunds. A number of stakeholders have indicated support for an analogy to the gain contingency model in ASC 450-30. Under that model, a receivable would only be recognized after all contingencies have been resolved and the gain is realized or realizable (i.e., the gain contingency model may delay asset recognition in some circumstances). We continue to believe that an analogy to ASC 410-30 represents the most appropriate model; however, we note that application of a gain contingency model may represent an acceptable alternative accounting policy.2

Monetization of Potential Tariff Refunds

Entities may obtain cash from an investor or other provider of financing (a “funder”) in exchange for the rights to any cash flows the entity receives from the CBP for IEEPA tariff refunds. We understand that despite the funder transaction, the entity (i.e., the importer of record) remains the party with the right to any CBP refund. Therefore, an entity’s tariff refund claim and any obligation to pass on any tariff refunds to the funder represent separate transactions (i.e., the transfer of rights to tariff refund collections to a funder does not affect the entity’s accounting for a potential tariff refund from the CBP under a loss recovery or gain contingency model). U.S. GAAP may not explicitly contemplate such transactions; however, in a manner similar to other tax receivables, we do not believe that the potential tariff refund transactions are within the scope of the ASC 860 derecognition model. In addition, since the obligations to the funder are contractual, we do not believe that ASC 450 applies. Ultimately, while the form of arrangements may vary, we generally believe that whether executed before or after an entity’s recognition of a tariff refund asset (i.e., under either a loss recovery or gain contingency model), such transactions should be accounted for as financing transactions (e.g., akin to sales of future revenues under ASC 470). The financing should only be derecognized once legally extinguished in accordance with ASC 405. In addition, other accounting considerations could apply to those transactions (e.g., the contract with the funder could represent a derivative subject to ASC 815-10, include embedded derivatives that require separate recognition under ASC 815-15, or be eligible for fair value accounting under ASC 825). There is no standard form of transaction, and entities may need to address novel, incremental accounting considerations for each transaction. Given the potential for transaction forms and the IEEPA tariff refund settlement processes to evolve as well as an absence of prescriptive U.S. GAAP, entities are encouraged to consult with accounting advisers when determining the appropriate treatment of tariff refund monetization transactions.

Liability Derecognition

Entities may have outstanding tariff payables as of a relevant balance sheet date for amounts owed to the U.S. government when importing goods became subject to tariffs that have since been invalidated by the Supreme Court’s ruling. We believe that such payables represent liabilities within the scope of ASC 405 and therefore should be derecognized when the entity “pays the creditor and is relieved of its obligation” or “is legally released [as] the primary obligor.” If the ruling voids the entity’s obligation to pay tariffs that were previously accrued but not yet remitted, the entity should derecognize the related payables in accordance with ASC 405 in the period in which they are legally released. An entity should involve legal counsel for assistance in assessing whether the ruling results in its legal release from such obligation. If an entity concludes that its obligation to pay tariffs is void, we believe that it should derecognize the outstanding payable as of the date of the ruling, but not earlier.

Subsequent Events

Entities with reporting periods that ended before the Supreme Court’s ruling and that have not yet issued their interim or annual financial statements should consider the subsequent event guidance in ASC 855 to determine the appropriate accounting treatment. Such entities should evaluate the effects of the ruling on their financial statements and whether the ruling qualifies as a Type 1 or Type 2 subsequent event.

We believe that it is appropriate to conclude that if the ruling was announced after the balance sheet date, the subsequent event is a Type 2 (nonrecognized) subsequent event (e.g., akin to a change in law). Consequently, ASC 855-10-50-2 would require disclosure of both “[t]he nature of the event” and “[a]n estimate of its financial effect, or a statement that such an estimate cannot be made” if the absence of such disclosure would result in misleading financial statements.

[Added April 1, 2026]

An entity may not be able to determine that the recovery of a tariff refund is probable as of the end of a reporting period (e.g., the entity may believe that the refund is reasonably possible). However, if developments after the end of the reporting period and before the entity’s issuance of its interim or annual financial statements3 indicate that recovery is probable (e.g., the CBP clarifies the refund process, or the entity receives a refund), the entity would apply the following guidance:

Loss recovery model — For an entity applying the loss recovery model by analogy to ASC 410-30, we believe that the developments after the end of the reporting period represent additional evidence about the conditions that existed as of the date of the balance sheet and that an asset therefore should be recognized as of the end of the reporting period in accordance with ASC 855.
Gain contingency model — For an entity applying the gain contingency model, developments after the reporting period, including receipt of a tariff refund, should not be recognized as of the end of the reporting period. ASC 855-10-15-5(c) indicates that gain contingencies “are rarely recognized after the balance sheet date but before the financial statements are issued or are available to be issued” and provides a cross-reference to ASC 450-30-25-1, which states that “[a] contingency that might result in a gain usually should not be reflected in the financial statements because to do so might be to recognize revenue before its realization.”

Accounting Estimates

The anticipated impact of an expected change in tariff policy should typically be factored into an entity’s accounting estimates as of the balance sheet date, in a manner similar to other business assumptions (e.g., an entity’s estimate of costs related to satisfying performance obligations in a contract with a customer). As discussed above, for entities whose reporting periods ended before the Supreme Court ruling, we believe that it is appropriate to conclude that the actual effect of the ruling on tariffs that differ from those used in management’s estimates would be a nonrecognized subsequent event. That is, management’s estimates would not be adjusted to reflect the expected impact of the ruling after the balance sheet date.

Impacts on Contracts With Customers

Entities may need to consider whether the Supreme Court’s ruling affects rights and obligations under contracts with customers. For example, if an entity’s contract with a customer permitted it to increase the price of its goods or services as a result of the enacted tariffs (e.g., pass the cost of the tariffs on to the customer), to the extent that those tariffs were deemed not legal (and the entity may potentially recover previously paid tariffs from the government), the entity may need to consider whether a refund obligation exists under any of its contracts with customers. In a manner similar to how an entity might consider the ruling to be akin to a change in law when determining whether it is a Type 1 or Type 2 subsequent event, the entity may reasonably conclude that a change in rights and obligations under a contract with a customer as a result of the ruling is a contract modification that should be accounted for as of the date of the ruling in accordance with ASC 606-10-25-10 through 25-13.

[Updated April 1, 2026]

An entity that expects to issue refunds to customers as a result of the Supreme Court’s ruling will need to carefully evaluate when it must record a refund obligation. If there is uncertainty associated with the amount of refunds that will be provided to a customer, the refund obligation is viewed as a form of variable consideration subject to the estimation and constraint guidance in ASC 606-10-32-5 through 32-14. Depending on the facts and circumstances, there could be instances in which an entity concludes that it is required to record a refund liability in a period that is earlier than that in which it concludes that it can record a refund asset for its right to recover tariffs from the government. This could be the case, for example, if an entity concludes that its right to recover tariffs from the government should be evaluated as a gain contingency but also determines that it has a present contractual obligation to refund amounts collected for tariffs to customers as a result of the Supreme Court’s ruling. This is because an entity may conclude that it is no longer probable that there will not be a significant reversal of revenue attributable to the obligation to refund tariffs collected from customers even though the entity has not yet met the conditions to record an asset for the expected tariffs to be recovered from the government. Consider the following example:

Example

Entity X concludes that it is more likely than not that it is entitled to and will receive a tariff refund on March 31, 2026. Entity X further concludes that it does not meet the requirements to record a tariff refund asset on March 31, 2026. Entity X passed through any tariff costs to its customers and its contract with Customer Y requires it to refund any tariffs that were passed through but deemed unconstitutional. Although X does not meet the conditions to record a tariff refund asset on March 31, 2026, X concludes that it needs to record a refund liability to Y. This is because X concludes that it is no longer probable that a significant revenue reversal will not occur related to its refund obligation to Y as of March 31, 2026.

If an entity’s obligation to refund tariffs to customers is predicated on the entity’s ability to recover tariffs paid to the government, the timing of recording a refund liability to customers might coincide with that of recording a refund asset. This is because when considering the guidance in ASC 606-10-32-27, an entity may conclude that it has only promised to pay consideration to a customer at the time it receives or otherwise recognized a right to receive tariff refunds from the government. However, careful consideration of the specific contractual terms and facts and circumstances is required.

Entities may also receive customer claims (e.g., requests for refunds or credits) related to perceived tariff-driven price increases even when a contract with a customer does not address such price adjustments. Those claims do not, by themselves, constitute a contract modification. However, entities should consider their customary business practices, public statements, and implied promises when evaluating whether customers might have a valid expectation that they will be entitled to refunds. That is, an entity’s contracts with customers could include an implied refund obligation related to tariffs that are expected to be recovered.

Entities will need to carefully consider their facts and circumstances when evaluating whether a refund obligation exists.

Disclosures

Entities may need to provide disclosures about the impact of the Supreme Court’s ruling in the footnotes to their financial statements (e.g., see ASC 275-10-50-6 through 50-8) as well as in other areas of their SEC filings, such as in Management’s Discussion and Analysis or the risk factors section. The extent of such disclosures would be based on the potential materiality of the impact. For more information about disclosure considerations in related circumstances, see Deloitte’s December 1, 2022, Financial Reporting Alert.

Contacts

	Chris Chiriatti Audit & Assurance Managing Director Deloitte & Touche LLP +1 203 761 3039 cchiriatti@deloitte.com		Christine Mazor Audit & Assurance Partner Deloitte & Touche LLP +1 212 436 6462 cmazor@deloitte.com
	Ignacio Perez Audit & Assurance Managing Director Deloitte & Touche LLP +1 203 761 3379 igperez@deloitte.com		Andrew Pidgeon Audit & Assurance Partner Deloitte & Touche LLP +1 415 783 6426 apidgeon@deloitte.com
	Noah Antonneau Audit & Assurance Manager Deloitte & Touche LLP +1 414 977 2606 nantonneau@deloitte.com

Footnotes

For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s “Titles of Topics and Subtopics in the FASB Accounting Standards Codification.”

ASC 250 requires entities to consistently apply an accounting policy, once adopted, unless they change to a preferable accounting policy.

Or before the entity’s financial statements are available to be issued, as applicable under ASC 855.

Heads Up is prepared by members of Deloitte's National Office as developments warrant. This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

The services described herein are illustrative in nature and are intended to demonstrate our experience and capabilities in these areas; however, due to independence restrictions that may apply to audit clients (including affiliates) of Deloitte & Touche LLP, we may be unable to provide certain services based on individual facts and circumstances.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/us/about to learn more about our global network of member firms. Copyright © 2026 Deloitte Development LLC. All rights reserved.