Trump Tariffs Leave Accountants Wrestling With Changing Terrain

The Trump administration’s tariffs on international imports are set to ripple throughout US companies’ financial statements as executives and accountants alike grapple with trade policy whiplash.

Accountants are advising companies to maintain strong financial guardrails and consistent reporting judgment as they assess the tariffs’ impact on key economic estimates and gauge whether they need to disclose the significance to investors. Still, ambiguity remains surrounding the future obstacles businesses could face amid unpredictable US trade policy.

Companies started disclosing risks associated with more defensive US trade policy in their annual financial reports even before President Donald Trump announced his sweeping worldwide tariffs on April 2. Coca-Cola Co. and Best Buy Co. Inc. are among firms that flagged the duties as a risk to operations in 10-K reports filed earlier this year.

While some companies including Delta Air Lines Inc. pulled full-year financial guidance due to unknowns surrounding global trade, others such as Albertsons Cos. Inc. have provided annual outlooks that exclude tariffs’ impacts.

Uncertainty around tariffs has left accountants to wrestle with “the fact that the information is just changing by the minute,” PwC US Chief Accountant Thomas Barbieri told Bloomberg Tax.

Trump on April 9 announced a 90-day pause on higher tariffs against dozens of countries, just hours after the escalated duties on 56 nations and the European Union took effect.

A 10% baseline tariff on most countries remains—and imports from China face 145% levies, though Trump on April 12 excluded smartphones and computers from some tariffs for now.

Economic volatility has driven accountants globally to their lowest confidence level since the pandemic summer of 2020, according to a recent survey by the Association of Chartered Certified Accountants and Institute of Management Accountants.

Reporting Estimates

Tariffs could affect key accounting estimates that companies follow when they close their books, Barbieri said. That includes estimates based upon fair value, or the current price products or assets fetch in an orderly market—a dynamic measure influenced by market conditions.

“When you’re figuring out fair value, you need to step into the shoes of how a market participant would think about the impact of tariffs,” he said.

Companies also risk decreased demand for products if they pass on tariff-related costs to customers. This could lead to companies writing down the value of assets, such as equipment, said Brigham Young University associate professor of accounting Brant Christensen.

“If that negative impact on consumer demand is significant enough to decrease sales, then the value of that equipment goes down because it’s producing goods that are no longer being purchased at the same level as before,” he said.

Impaired assets have a lower market value than the one listed on companies’ balance sheets.

Estimating the reduction in economic benefit is “subject to all types of uncertainty and unknowns,” Christensen said.

Barbieri said it’s important for companies to have contemporaneous documentation detailing their reasons for making business judgments—such as passing along subsets of costs to customers—in order to stay internally consistent.

Risk Assessment

Tariffs could trigger a broader range of disclosures depending how they impact companies’ finances.

Companies that may lack sufficient “headroom” in their financial liquidity—the ease at which companies can convert assets to ready cash without affecting market price—could face challenges, Barbieri said.

Severe hits to liquidity may require a business to disclose that there’s substantial doubt about its ability to continue as a going concern, or as a financially stable company able to meet its obligations.

Additionally, the Financial Accounting Standards Board’s ASC 275 directs companies to discuss when it’s possible that estimates could change in the near term and have a material impact. The rules require disclosure of certain concentrations that make businesses vulnerable.

If a company imports all of its raw materials from a country subject to high tariffs, there could be severe financial impacts. US companies’ reliance on purchasing materials from China could bring concentration risks amid escalated duties, said CohnReznick partner Matthew Derba.

Barbieri noted that the marketplace will find it helpful to have specific details from businesses about their judgments. The more companies explain their thinking to investors in financial reports, “the better off you are,” he said.

Internal Guardrails

As companies adapt to the new trade environment, accountants stressed the importance of maintaining strong internal controls, or procedures, for accurate financial reporting and durable fraud prevention.

Tariffs may motivate businesses to reconfigure their supply chains to avoid increased costs. In January, nearly half of Canadian businesses surveyed by KPMG in Canada said they were already reconfiguring their supply chains to divert US-destined exports to third-party countries.

Changing suppliers can introduce numerous risks. If companies don’t conduct proper due diligence processes, “you might associate yourself with a fraudster,” according to Myriam Duguay, a partner and national service line leader for forensics for KPMG in Canada.

While vendor approval processes are standard, economic instability may put additional pressure on companies to circumvent controls in favor of quicker supply chain reconfiguration, BYU’s Christensen said. Still, it’s important to have careful processes in place to ensure companies aren’t working with third parties that fall short of their risk tolerance, he said.

Fraudsters can also meddle in relationships between a company and a new supplier to intercept payments. Conducting supplier background checks and streamlining communications will help companies to deter fraud risks, Duguay said.

PwC’s Barbieri advised companies to have an “evergreen process” in place for making reassessments as tariff impacts emerge.

Corporate boards’ audit committees can provide helpful expertise, as their members can have past experience navigating uncertainty and market volatility, according to Todd Rahn, senior managing director and co-leader of the SEC and accounting advisory practice at FTI Consulting.

Accountants can bring the “groundedness” to tariff-related discussions as companies stay focused on their mission, he said.