The Supreme Court's recent ruling that the International Emergency Economic Powers Act (IEEPA) did not grant President Trump the authority to impose certain tariffs has set off a flurry of activity — contract reviews, refund analyses, and recovery conversations across industries. If your company absorbed IEEPA tariff costs, either directly as an importer of record or indirectly through contractual pass-through provisions or price increases, you're likely asking the same question: can we get that money back?
A recent article from Baker Donelson, "IEEPA Tariffs Invalidated: What Companies Should Do Now to Protect Contract Rights" (Smith, Faerber & Becerra, February 26, 2026), walks through the practical legal steps — reviewing contracts and shipping documents, evaluating informal agreements, and determining dispute resolution pathways. It's a worthwhile read for anyone navigating these conversations with importers or suppliers.
But before your finance team starts booking a receivable, there's an important accounting conversation to have.
From a US GAAP perspective, potential tariff refunds — whether pursued directly or through a contractual pass-through arrangement — are gain contingencies, not assets. And under ASC 450, Contingencies, the bar for recognizing a gain contingency is high.
The standard generally prohibits recognition of a gain contingency until it is realized or realizable. What does that mean in practice? Cash has been received, or the right to receive it is essentially assured — not probable, not likely, not "we have a strong legal argument." Essentially assured.
This is a meaningful distinction, and one that trips up companies in situations like this. Strong legal arguments don't change the accounting. A favorable court ruling doesn't change the accounting. Active negotiations with your supplier don't change the accounting. Until the money is in hand or recovery is essentially certain, recognition on the balance sheet is not appropriate under US GAAP.
Recognition being off the table doesn't mean the matter is invisible in your financial statements. If your recovery efforts are material and the cash inflow is reasonably possible, disclosure may be required — even if recognition is not.
Companies should evaluate whether their financial statement users need to understand the nature and potential magnitude of ongoing tariff recovery efforts. This is particularly relevant when:
Disclosure in these cases isn't optional — it's a matter of transparency and compliance with the standard.
As you work through the legal analysis Baker Donelson outlines — reviewing contracts, Incoterms, informal agreements, and escalation paths — keep these accounting considerations running in parallel:
Don't recognize prematurely. The optimism of a favorable ruling or a productive supplier conversation can create pressure to record a receivable. Resist it. ASC 450 sets the threshold deliberately high for gain contingencies, and the risk of recognizing too early outweighs the benefit.
Document your analysis. Even when recognition isn't appropriate, it's important to document why — and to evaluate whether disclosure is. Auditors will want to see the thought process, particularly for material amounts.
Revisit each reporting period. The facts can change. If a settlement is reached, cash is received, or the right to payment becomes essentially assured, the accounting conclusion changes too. Build this into your close process.
Coordinate legal and accounting conversations. The legal team may be optimistic about recovery. Finance needs to apply a different lens. Aligning both perspectives early avoids surprises at audit.
The IEEPA ruling opens the door to legitimate recovery opportunities for many companies. But the excitement around potential refunds needs to be tempered with clear-eyed accounting judgment. Probability isn't enough under ASC 450. The path from "we think we can recover this" to "we can record an asset" is longer than it might appear — and getting it wrong has real financial reporting consequences.
If you're working through tariff recovery discussions and want to talk through the accounting implications, reach out. This is exactly the kind of issue where getting the accounting and legal analysis aligned early makes a difference.
For more on the legal steps companies should consider, see: Smith, P.L., Faerber, F., & Becerra, J. (2026, February 26). "IEEPA Tariffs Invalidated: What Companies Should Do Now to Protect Contract Rights." Baker Donelson. https://www.bakerdonelson.com/ieepa-tariffs-invalidated-what-companies-should-do-now-to-protect-contract-rights
This post is intended for informational purposes and does not constitute accounting or legal advice. Consult your advisors regarding your specific facts and circumstances.