In light of the recent US Supreme Court tariffs ruling, IFRS reporting entities need to consider the possible accounting implications of the situation. This IFRS alert considers some possible financial reporting impacts of the ruling for 31 December 2025 year-end reporting and the current interim reporting period.
Background
During 2025 and early 2026, the US Customs and Border Protection (USCBP) collected tariffs authorised by President Trump via executive order under the legal authority of the International Emergency Economic Powers Act (IEEPA) on many goods imported into the US. These tariffs included many of the ’reciprocal’ tariffs enacted on ’Liberation Day’ in April 2025 and the fentanyl-related tariffs imposed on Canada, China, and Mexico. However, on 20 February 2026, the Supreme Court of the United States (SCOTUS) ruled that the IEEPA did not authorise the imposition of such tariffs by President Trump. The ruling does not decide whether or how tariffs previously collected by USCBP should be refunded, and does not refer to any tariffs authorised under other legal authorities.
This alert summarises some of the financial reporting considerations related to the SCOTUS ruling regarding the IEEPA tariffs.
Accounting considerations
When determining the accounting implications of the SCOTUS ruling, it is important to first consider which accounting guidance applies for recognising and derecognising tariff liabilities. Tariffs imposed by executive order and actively enforced by USCBP are legal obligations in the scope of IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’. Accordingly, tariff obligations are recognised when they are legally owed and as a result of a past event that triggered the levy. They are subsequently derecognised when they are either paid, or the reporting entity is otherwise legally released from the obligation to pay them.
Events after the reporting period
Reporting entities that have not issued financial statements with reporting periods ending prior to the SCOTUS ruling (ie 20 February 2026) will need to consider whether the guidance on events occurring after the reporting date in IAS 10 ‘Events After the Reporting Period’ applies and to determine whether the ruling represents an adjusting or non-adjusting event after the reporting period.
As discussed above, tariffs are legal obligations. Consistent with the guidance in IAS 10, changes in tax rates or tax laws are generally recognised in the period when the changes are enacted, and by analogy this could include changes enacted by judicial rulings. While paragraph 9 of IAS 10 states that the settlement of a court case after the reporting period that confirms there was a present obligation at the reporting date would be an adjusting event, a judicial ruling, as is the case with this SCOTUS decision, would not fall into this scope. This is because the SCOTUS ruling effectively invalidated the tariffs and as such is considered to be a change in law as opposed to a court case.
Accordingly, a reporting entity with a year-end prior to 20 February 2026 may reasonably conclude that the SCOTUS ruling is a non-adjusting event that does not require recognition in unissued financial statements with reporting dates prior to the ruling. However, IAS 10 requires disclosure of (1) the nature of the event, and (2) an estimate of its financial effect (or a statement that no estimate can be made) if the information could reasonably be expected to influence the decisions of primary users, or if the absence of such disclosure would cause the financial statements to be misleading.
Recognition of possible IEEPA tariff refunds
The SCOTUS ruling does not determine whether or how tariffs previously collected by USCBP should be refunded. While subsequent lower court decisions have indicated that refunds may be due to the reporting entities that have previously paid IEEPA tariffs, no administrative process to identify and pay refunds has yet been established. However, certain reporting entities have sued the government for refunds either individually or collectively with other entities.
Entities may reasonably apply the contingent asset guidance in IAS 37 when determining whether they should recognise an asset related to future refunds of previously paid IEEPA tariffs. Application of the guidance in IAS 37 on contingent assets would result in recognition of IEEPA tariff recoveries when received, or virtually certain to be received.
Currently, there is a lack of clarity regarding the process by which an entity may seek tariff refunds, as well as whether the government will challenge any requested refunds in court. Reporting entities should carefully consider all known facts and circumstances, including entity-specific and external matters when evaluating whether a refund of previously paid IEEPA tariffs is virtually certain. In particular, entities should consider the American government’s current posture toward paying refunds, whether a clear process for obtaining refunds has been established, the outcome of court cases or administrative proceedings with similar facts and circumstances, and whether the reporting entity intends to pursue the collection of refunds it may be owed. A high degree of uncertainty regarding these and other relevant factors is likely to preclude a conclusion that recovery is virtually certain at this time.
Impact of IEEPA tariff refunds
If a reporting entity recognises an asset relating to an anticipated tariff refund, or has actually received a tariff refund, it must determine the appropriate offsetting entry to recognise. The offsetting entry depends on whether the costs of the tariffs are capitalised into an asset that remains on the reporting entity’s statement of financial position or those costs have been recognised in earnings.
Tariff costs still on the reporting entity’s statement of financial position
If the reporting entity included the cost of the tariff in the cost accumulated into the basis of an asset recognised, such as inventories, a refund of the tariff is recognised as a reduction in the cost basis of that asset. As a result, in such circumstances, the cost basis of an asset that remains on the reporting entity’s statement of financial position should be reduced by the recognised tariff refund associated with that asset. Additionally, entities may need to consider additional consequential adjustments to accumulated depreciation to reflect the adjusted cost basis.
Tariff cost recognised in earnings
A reporting entity may have recognised the cost of tariffs in earnings (either by directly expensing the cost of the tariff or by reducing previously capitalised assets through, for instance, cost of sales). In such circumstances, the tariff refund should also be recognised in earnings.
Subsequent derecognition of unpaid liabilities
There may be instances where reporting entities have recognised a liability for the IEEPA tariffs, but it remained unpaid at the end of the reporting period. Reporting entities will now need to determine if this liability should be derecognised.
Derecognition of the liability depends on whether the entity no longer has a present obligation in accordance with IAS 37 – ie whether it has a legally enforceable obligation that the reporting entity has no choice but to settle.
The ruling eliminated IEEPA as a standalone source of tariff authority and did not address the consequences of whether previously imposed but unpaid tariffs remain legally enforceable.
Therefore, the reporting entity could reasonably conclude that they leave the obligation on the statement of financial position until further legislative action occurs, or that they no longer have an obligation to pay the tariff. In our view this conclusion is disconnected from whether the reporting entity should recognise a contingent asset for any amounts already paid.
Other matters
Reporting entities may also need to consider other potential accounting implications of the SCOTUS ruling that are not directly related to the previously paid tariffs or their potential refunds.
For more information about certain financial reporting implications of changing economic environments, please see our publication ‘Changing economic environments’.
Estimates, including going concern assessments
While the SCOTUS ruling invalidated the IEEPA tariffs, President Trump quickly ordered the imposition of other tariffs at similar levels to the IEEPA tariffs under different legal authorities. Reporting entities may need to consider the impact of these new tariffs on certain estimates, including in any assessment of the reporting entity’s ability to remain a going concern in accordance with paragraphs 25 and 26 of IAS 1 ‘Presentation of Financial Statements’ as well as any relevant impairment testing performed by the reporting entity in accordance with IAS 36 ‘Impairment of Assets’.
Customer contracts
Reporting entities should carefully consider whether the SCOTUS ruling impacts its accounting for customer contracts in accordance with IFRS 15 ‘Revenue from Contracts with Customers’ or other relevant guidance.
An entity may have legally passed on the cost of tariffs to its customer, as allowed by in-place revenue contracts. Similar to the discussion above, a reporting entity with a year-end prior to 20 February 2026 may reasonably conclude that the SCOTUS ruling is a non-adjusting event and that any change to the rights and obligations in an entity’s revenue contracts (including the right to pass on costs of tariffs to customers) should be evaluated using the contract modification guidance in IFRS 15. When applying the contract modification guidance, reporting entities should ensure that their revenue-related estimates (including estimating variable consideration, evaluating whether the constraint guidance must be applied, and measures of progress) are appropriately updated for the tariff impacts.
For customer contracts that do not explicitly allow entities to pass on the tariff costs, an entity should carefully consider whether the SCOTUS ruling, along with the entity’s statements, actions, and all other relevant facts and circumstances surrounding its customer contracts, create an implied promise to issue customer refunds. Even if an entity determines it does not have an implied promise to issue a customer refund, it may need to consider whether the ruling impacts its estimate of variable consideration in a contract. For example, despite not having a legal obligation, the reporting entity may be willing to offer a price concession or a rebate to its customer, especially if there is a strong expectation that such a refund will be granted.
Disclosures
As discussed above, reporting entities should carefully evaluate whether the SCOTUS ruling and nullification of IEEPA tariffs, as well as the subsequent imposition of additional tariffs, represent a material event after the reporting period that requires disclosure under IAS 10.
Furthermore, reporting entities should consider the need for additional disclosures under other relevant guidance For instance, include the disclosure of risks and uncertainties related to tariffs under IAS 1, changes to various estimates under guidance applicable to the relevant impacted estimate, and whether the potential retrospective consequences of the ruling may impact performance measures used as key performance indicators (KPI) resulting in a change to profit sharing arrangements.
Our thoughts
The SCOTUS decision may present many financial reporting challenges in 2026, potentially impacting 2025 annual reporting as well as interim reporting in 2026. Due to the potential significant impact of this decision as well as the associated uncertainty, we encourage reporting entities to carefully assess both tariffs owed as well as potential refunds of those already paid. If you think you may be impacted by this or would like to discuss these issues and considerations further, please reach out to the IFRS contact at your local Grant Thornton firm.
