Refunds on Trump Tariffs Pose Accounting Dilemmas for Companies

Nike Inc. and Levi Strauss & Co. are among companies grappling with how to record refunds on the Trump administration’s tariffs in their financial reports while uncertainty related to the payments persists.

Nike has paid $1 billion in International Emergency Economic Powers Act tariffs invalidated by the Supreme Court, though potential refunds remain “highly uncertain,” the footwear maker said in its latest quarterly report filed April 1. Meanwhile, Levi told investors it would recognize a refund related to $80 million in IEEPA tariffs it paid when accounting rules are met relating to contingencies, or situations with uncertain outcomes that will be resolved in the future.

Other publicly traded businesses headed into quarterly earnings season this May likewise will need to make judgment calls on the best way to account for refunds, should they get paybacks from the Trump administration now that a new request portal is live. The method they pursue could vary depending on how they decide to view the refund, with different accounting approaches for probable versus realized payments.

C-suite leaders will have to justify their financial reporting choices to boards, investors, and analysts—who likely will want to see how refunds could affect business profitability.

“Making the right decisions around this level of uncertainty—and providing the right amount of information to investors without over-claiming anything—is really important,” North Carolina State University assistant professor Carly Burd said.

Customs and Border Protection last week launched a web portal for importers to file refund requests following the Supreme Court’s February ruling. President Donald Trump has scrutinized the high court’s decision, saying April 21 he would remember those who decline to seek refunds.

Companies with first quarters concluding March 31 will file financial reports with the Securities and Exchange Commission by mid-May. As they prepare filings, some have encountered third parties offering up front payments in exchange for the right to receive processed refunds, which bring their own set of accounting considerations.

“One question that we’ve been fielding is, ‘If I believe I’m owed a tariff refund and a company offers to buy my right to that refund, can I treat the money I receive from this third party as a refund?’” Grant Thornton LLP partner and chief accountant Graham Dyer said.

Weighing Approaches

Companies could plan to recognize an asset for a tariff refund claim when receipt of that refund is “probable,” a method known as loss recovery.

Alternatively, businesses could take a more conservative accounting approach under the gain contingency model and only record the asset when it’s “realized” or “realizable.”

“That might be when either you get the cash in hand or you’ve got an affirmative agreement around the amount that you’ll be refunded with, with Customs,” PwC US Chief Accountant Thomas Barbieri said.

Food technology company BranchOut Food Inc. is treating its potential tariff refund of more than $300,000 as a gain contingency and not recognizing the amount in 2025 financial statements, according to its latest annual report.

The gain contingency model can be more straightforward to apply, since determining when a refund is “probable” under the loss recovery method requires judgment.

Accounting teams will need to do a “careful evaluation” of the “probable” threshold that may require consultation with legal counsel and external advisers, said Ryan Walker, a partner in Crowe LLP’s national office.

Nike discussed uncertainty in its quarterly report, saying current ambiguity about the timing of refunds has led the company to determine “potential recovery of any funds is not probable.”

Companies shouldn’t shy away from a loss recovery model if they are okay explaining judgment calls to their boards and investors, Grant Thornton’s Dyer said. This model may be advantageous for companies that can be slower to turn around inventory.

“The sooner you can recognize a tariff refund, the sooner you can reduce your inventoried costs and thereby improve your future margin,” Dyer said.

Nike, Levi, and BranchOut Food didn’t respond to requests for comment.

Refund Deals

Companies are also assessing how to account for emerging deals in which they could effectively “sell” their rights to a refund in exchange for up-front payments from third parties.

Funds including King Street Capital Management and Fulcrum Capital Holdings have bet on tariff-refund claims, Bloomberg News previously reported.

Capital markets firm Seaport Global says it’s connecting importers aiming to monetize their refund claims faster with institutional investors willing to provide near-term liquidity.

Broadly, these transactions raise accounting questions. While economically businesses may think they secured a gain, the accounting doesn’t necessarily afford them that option, PwC’s Barbieri said.

“For the most part I think it’s going to be hard for people to recognize that as a locked in gain today,” Barbieri said. “Oftentimes that might end up being a financing.”

Dyer said his team’s expectation is that a “super majority” of the transactions will be accounted for as borrowings under accounting rules, called generally accepted accounting principles, or GAAP.

The Financial Accounting Standards Board keeps tabs on matters including tariffs through public outreach and has a research project on current trends and emerging issues, spokesperson Christine Klimek said in a statement.

Quarterly Earnings

In the upcoming earnings cycle, accounting analyst Olga Usvyatsky said she hopes to learn more about the financial reporting models businesses are using for tariff refunds, as well as the refunds they expect to receive.

Even if peer companies choose the same model, the associated judgment calls might lead them to different decisions about when refunds should be recognized, Usvyatsky said.

“There is definitely room for inconsistent accounting—and even more room for inconsistent disclosure,” Usvyatsky said.

Moving forward, companies need to disclose details to investors about their accounting and the items that could be affected, Barbieri said.

“Have transparent disclosure along the way, both in regards to the amount—but also in regards to ultimately any bookkeeping you do, what line items it’s hitting—so that investors can put Humpty Dumpty back together again,” Barbieri said.