In this article, learn about:
Why a filed tariff refund claim doesn’t automatically become a balance sheet asset
The two accounting models companies are choosing between, and what real disclosures show
Why the refund process comes down to a data reconciliation problem your team can start now
Where the data requirements behind IEEPA tariff refunds actually stand today, and what an operationally ready process looks like
Billions of dollars in International Emergency Economic Powers Act (IEEPA) tariff refunds are moving through U.S. Customs and Border Protection (CBP) right now, and most of the coverage stops at eligibility and filing. Less has been written about the harder question: what do finance and operations teams do with a refund claim between the day it’s filed and the day cash arrives?
The short answer for accounting for tariff refunds is that the claim feels like money, but the books can’t always treat it that way yet. U.S. GAAP has no standard written for this exact situation, so companies are applying two different models by analogy, and reasonable accountants disagree about which one fits. This piece walks through both models, what companies are actually disclosing, and the operational groundwork that determines whether your eventual recognition decision has anything reliable to stand on.
This is a process guide, not accounting advice. Every characterization below is attributed to the firm that made it. Work with your own accountants and legal counsel before recording anything on your books.
Is a Tariff Refund Claim an Asset Yet?
For a tariff refund to become an asset comes down to which accounting model the company chooses to use. The two models are:
The Loss Recovery Model
Deloitte’s National Office holds that companies can apply the loss recovery model in Accounting Standards Codification (ASC) 410-30, written for environmental liability recoveries, by analogy to tariff refunds. A company that already expensed tariff costs can recognize a refund receivable once recovery is probable, without waiting for cash in hand.
The Gain Contingency Model
Other firms, including CohnReznick, generally view IEEPA claims as gain contingencies under ASC 450-30. A contingency that might result in a gain typically isn’t reflected in the financial statements until it’s resolved, which in practice means the refund is approved or received.
Neither model is wrong. Both are accepted analogies to guidance never written with tariff litigation in mind, and the choice is your accountants’ to make based on your specific facts.
Why Are Companies Taking Different Approaches?
Public disclosures from the same reporting period show that both models are in active use, which makes the abstraction concrete.
The Wait-and-See Disclosures
Flowers Foods and e.l.f. Beauty both disclosed in their May 21, 2026 10-Qs that they are applying the gain contingency model, according to reporting from Intelligize. Both companies cited unresolved uncertainty, including whether the government would appeal the Court of International Trade’s (CIT) refund order and how the refund mechanics would ultimately work, as the reason they haven’t recorded a receivable.
The Recognized-Asset Disclosures
Other companies concluded they had enough clarity to move forward. John Deere disclosed in a May 21, 2026 8-K that it recorded a $272 million recovery for refund claims CBP had already filed and accepted. VF Corp went further, recognizing its full $149.7 million IEEPA tariff payment as a receivable:
- $93.8 million as a reduction to cost of goods sold
- $55.9 million still sitting in inventory
- A separate $37.6 million liability for amounts it has committed to pass along to certain vendors and partners once the refunds arrive
That split shows how much the accounting depends on specific facts: how the original cost was recorded, whether the inventory has sold, and whether the refund is contractually owed to someone else down the chain.
What Does Building a Refund Inventory Actually Involve?
Whichever model your accountants choose, the recognition decision is only as good as the data behind it. That work is operational, not an accounting judgment call, and finance and operations teams can make real progress on it before the recognition question is even settled.
According to Uniqus, a defensible refund inventory needs controls across four areas:
- Data completeness: reconcile customs broker data to the general ledger, flag liquidated versus unliquidated entries, and separate IEEPA duties from Section 232 and Section 301 duties, which were never invalidated and remain fully in effect
- Model application: document which accounting model was chosen and why, reviewed at the management level
- Probability assessment: reassess quarterly as CIT orders and CBP processing updates change the facts
- Classification: sort refunds correctly across inventory, cost of goods sold, fixed assets, and revenue, including the customer pass-through analysis under ASC 606
Build this now, before the recognition question is fully resolved. Teams that skip it and treat the refund as found money tend to spend the following year untangling it.
Where Do IEEPA Tariff Refunds Stand Right Now?
The refund process has been live, interrupted, and moving since February 2026, and the status changes often enough that any specific date here should be verified against CBP’s own guidance before you rely on it.
The Supreme Court ruled on February 20, 2026, that IEEPA doesn’t authorize the tariffs the president had imposed, but the ruling didn’t address how refunds would work. The CIT ordered CBP on March 4, 2026, to begin the refund process, and CBP responded that its systems needed to be built out first. Phase 1 of CBP’s Consolidated Administration and Processing of Entries (CAPE) portal launched on April 20, 2026, covering both unliquidated entries and entries within 80 days of liquidation, which accounts for roughly 63% of affected entries by CBP’s own estimate.
A broader CIT order followed in April 2026, directing refunds on a wider population of entries, including some already liquidated. That progress was then interrupted when the government appealed the broader order. As of this writing, the appeal is still working through the Court of Appeals for the Federal Circuit, according to Greenberg Traurig. CBP has kept expanding CAPE in the meantime, adding a second phase for entries flagged for reconciliation.
None of this is a forecast for when your specific refund will arrive. Track your own entries through CBP’s ACE portal and coordinate timing questions with your trade counsel.
What Else Should You Flag to Your Advisors?
A few complications won’t change whether you pursue a refund, but they’ll change how much you recover and how it gets reported.
Interest Accrual
The CIT ruled that refunds of unlawfully collected IEEPA duties should include interest, which keeps accruing while your refund is delayed, according to CLA. On older entries, that component can meaningfully change the total recovery.
Tax Treatment
If your company deducted tariff costs through cost of goods sold or capitalized them into inventory, the refund generally produces taxable income when received, per CLA’s guidance for importers. Coordinate the timing with your tax team so book recognition and tax treatment don’t fall out of sync.
Customer and Vendor Pass-Through.
If tariff costs were passed on to customers through pricing, you may owe a refund or credit back to them. This is a separate question from whether CBP recognizes your claim. VF Corp’s disclosed vendor liability is a real example of this in practice.
Each is worth a conversation with your accountants, and the pass-through question with legal counsel too.
What Does an Operationally Ready Refund Process Look Like?
Regardless of which model your company applies, a few steps put you in a stronger position when the recognition decision is made:
Double-check your ACH banking information is current in CBP’s ACE portal
Retain entry summaries, duty payment records, and cost allocations for every relevant shipment, organized by customs entry
Assign a single owner for the refund file instead of scattered spreadsheets and inboxes
Set a recurring cadence for updating the refund inventory as CIT orders and CBP processing news change the facts
Loss Recovery vs. Gain Contingency: A Side-by-Side Comparison
Model | Recognition trigger | Documentation burden | Companies known to have adopted it |
Loss recovery (ASC 410-30 by analogy) | Recovery is probable, even before cash is received | Higher: requires documented probability assessment tied to specific entries | John Deere, VF Corp |
Gain contingency (ASC 450-30) | All contingencies resolved; refund approved or received | Lower: recognition follows CBP’s own confirmation | Flowers Foods, e.l.f. Beauty |
Frequently Asked Questions
Is a Tariff Refund Considered Revenue?
No. GHJ Advisors notes that refunds generally shouldn’t be presented as revenue, since they don’t arise from a contract with a customer. They’re typically presented as a reduction to inventory or cost of goods sold, consistent with how the original duty was recorded, or occasionally as other income.
Can We Recognize a Receivable Before We Get the Cash?
Depends on the model. Under loss recovery, a receivable can be recognized once recovery is judged probable. Under gain contingency, recognition generally waits until the refund is approved or received.
Are Tariff Refunds Taxable?
Often, yes. If the original tariffs were deducted through cost of goods sold or capitalized into inventory, the refund generally produces taxable income when received, according to CLA.
What Happens to Our Accounting if the Government’s Appeal Succeeds?
That depends on the outcome, which isn’t known yet. Keep monitoring CBP’s guidance and your own entries’ status, and revisit your probability assessment with your accountants as the litigation develops.
This article summarizes accounting guidance published by third-party firms and CBP’s own published guidance. It is not accounting, tax, or legal advice. Work with your company’s accountants and legal counsel to determine the appropriate treatment for your specific facts.
Want Help with the Data Discipline Behind Recovery?
Reconciling broker data, separating duty types, and tracking documentation by entry is the same discipline SPS Commerce solutions bring to trading partner data every day. If your finance team is also sitting on unrecovered retailer deductions while you sort out tariff refunds, SPS Revenue Recovery addresses that separate but related problem.
Not ready for that conversation yet? The Supply Chain Source has more compliance and trade education to help you stay current as the refund process develops.