Here’s the question keeping controllers up at night: you know your company is owed an IEEPA tariff refund, but is it a receivable you can book today, or a contingent asset that sits in the footnotes? The answer determines whether your balance sheet reflects millions of dollars in recoverable assets — or whether those assets remain invisible to investors, lenders, and your board until cash actually hits the account.
ASC 450-20 is the standard that governs this question. It’s the gain contingency framework, and applying it to IEEPA tariff refunds requires walking through a specific set of criteria that many accounting teams haven’t encountered in this context before. This article breaks down exactly how the standard applies, when the “probable” threshold is met, and what your auditors need to see.
ASC 450-20: The Gain Contingency Framework
Under ASC 450-20 (Contingencies — Gain Contingencies), a gain contingency is an existing condition or situation involving uncertainty that will be resolved when one or more future events occur or fail to occur. The standard takes a conservative approach: gain contingencies should not be recognized in the financial statements until the gain is realized or realizable.
The standard does require disclosure of gain contingencies that are probable, even when recognition isn’t appropriate. And here’s where IEEPA refunds occupy unusual ground — the legal basis for recovery is about as certain as it gets, which pushes many claims past the contingency stage entirely.
The Three Probability Levels
ASC 450 uses three probability levels:
| Level | Definition | IEEPA Application |
|---|---|---|
| Probable | The future event is likely to occur | Refund entitlement is established by Supreme Court ruling and CIT order |
| Reasonably possible | More than remote but less than likely | Applies if there are claim-specific uncertainties (data issues, contested entries) |
| Remote | Slight chance of occurring | Does not apply to valid IEEPA claims post-ruling |
For gain contingencies, ASC 450-20-25-1 states that a contingency should not be reflected in the financial statements because doing so might recognize revenue before it’s realized. But this guidance applies to uncertain gains. When the uncertainty has been substantially resolved — as it has for IEEPA refunds — the gain contingency framework may no longer be the right lens.
Why IEEPA Refunds May Not Be Contingent at All
This is the argument more companies and auditors are accepting: after the Supreme Court’s 6-3 ruling and the CIT’s March 4 order directing CBP to process refunds, IEEPA refund claims aren’t really contingent. The legal question is resolved. The administrative process is underway. The only remaining uncertainty is timing — not whether you’ll be paid, but when.
Under this view, the refund is better characterized as a receivable — an unconditional right to receive cash — rather than a gain contingency. The supporting factors:
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The legal basis is final. The Supreme Court’s constitutional ruling cannot be overturned by Congress or the executive branch. There’s no appeal. There’s no legislative fix that could retroactively validate the tariffs.
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The administrative process is defined. CBP has announced the CAPE system for processing refunds. The CIT has ordered CBP to comply.
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The amount is determinable. Your ES-003 entry summary data shows the exact IEEPA duties paid per entry. Statutory interest under 19 U.S.C. Section 1505(c) can be calculated using published IRS rates.
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Credit risk is negligible. The obligor is the U.S. government. There’s no credit risk on a Treasury obligation.
If your auditor agrees with this characterization, you can book the receivable now — subject to measurement considerations discussed below.
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When “Probable” Is Met: The Recognition Trigger
Even if your auditor prefers the gain contingency framework, the “probable” threshold is likely met for most IEEPA claims after the Supreme Court ruling. Here’s the analysis:
Before February 20, 2026 (Pre-Ruling)
Prior to the Supreme Court decision, IEEPA refunds were genuinely contingent. The legal challenge was pending, the outcome was uncertain, and the probability of recovery depended on the Court’s ruling. During this period, disclosure as a gain contingency was appropriate, but recognition was not.
February 20 - March 4, 2026 (Post-Ruling, Pre-CIT Order)
After the ruling but before the CIT’s implementation order, the legal basis was established but the refund mechanism was unclear. Many companies moved from “reasonably possible” to “probable” during this window, triggering disclosure requirements but leaving recognition debatable.
After March 4, 2026 (Post-CIT Order)
With the CIT’s March 4 order directing CBP to process refunds and the CAPE system announced, the remaining uncertainty is administrative, not legal. For claims where the data is validated and the filing is prepared (or filed), the “probable” threshold is clearly met.
For most importers preparing Q2 2026 financial statements, recognition as a receivable is supportable. The exact timing of the recognition trigger depends on your specific claim status — whether you’ve filed, whether your data is validated, and whether any entry-level issues exist.
Measurement: How Much to Recognize
Once you determine that recognition is appropriate, you need to measure the receivable. Here’s the framework:
Principal Amount
The principal is the sum of all IEEPA duties paid, identified from your entry summary data. This is a known, precise number — not an estimate. For each entry, the IEEPA duty amount is the difference between the total duties deposited and the duties that would have been owed without the IEEPA tariff codes (HTS 9903.01 and 9903.02).
Your customs broker can pull this data from CBP’s ACE portal, or you can request an Impact Assessment that calculates it across your full portfolio.
Statutory Interest
Interest under 19 U.S.C. Section 1505(c) accrues from the date of deposit to the date of refund. The rate is the federal short-term rate, adjusted quarterly by the IRS. As of early 2026, the rate is approximately 3%.
The interest component should be recognized separately from the principal — it’s interest income, not a reduction of COGS. You can accrue it as a receivable that grows each quarter until collection.
Potential Adjustments
CBP may make adjustments during processing if entry data contains errors. If you have reason to believe some entries may be adjusted (classification disputes, valuation questions), you should reduce the recognized amount by your best estimate of potential adjustments. For most importers with clean entry data, no adjustment is necessary.
Fair Value Considerations
If you’re recognizing the receivable at fair value rather than nominal value, you’ll need to discount for the expected collection timeline. A $2 million refund expected in 24 months at a 5% discount rate has a fair value of approximately $1,814,000. The time-value analysis provides detailed NPV calculations at different discount rates and timelines.
Most companies will recognize at nominal value (face amount) with separate classification as current or non-current based on expected timing.
Disclosure Notes: What to Include
Whether you recognize a receivable or not, your disclosure should include:
If Recognized as a Receivable
“The Company has recognized a receivable of $X million for the recovery of tariffs paid under the International Emergency Economic Powers Act between [dates]. The U.S. Supreme Court ruled on February 20, 2026 (Learning Resources, Inc. v. Trump) that such tariffs were unconstitutional, and the Court of International Trade subsequently ordered U.S. Customs and Border Protection to process refunds. The receivable includes $X million in estimated statutory interest. Collection is expected within [12-36] months through CBP’s CAPE administrative refund system. The receivable has been classified as [$X million current / $X million non-current] based on expected collection timing.”
If Disclosed as a Gain Contingency (Not Recognized)
“The Company paid approximately $X million in tariffs imposed under the International Emergency Economic Powers Act between [dates]. On February 20, 2026, the U.S. Supreme Court ruled these tariffs unconstitutional. The Company believes recovery of substantially all of this amount, plus statutory interest, is probable. The Company has not recognized a receivable as of the balance sheet date because [the exact amount or timing remains subject to administrative processing / the Company has not yet filed its formal claim / etc.]. The Company expects to file its claim in [timeframe] and receive recovery within [12-36] months.”
Additional Disclosure Items
Depending on materiality and your auditor’s requirements, you may also need to disclose:
- The recovery path you’re pursuing (government filing vs. immediate capital)
- Whether any portion of the refund may be owed to downstream customers who received tariff surcharges
- Tax implications of the recovery (see the CFO guide for an overview)
- Key assumptions about collection timing
What Auditors Are Looking For
Auditors examining IEEPA refund treatment are focusing on several areas:
Supporting Documentation
Your auditor will want to see the source data supporting the receivable amount. This includes ES-003 Entry Summary Details from ACE, showing each affected entry with the IEEPA duty amount. An Impact Assessment provides this in a consolidated, auditor-ready format.
Legal Basis
Your auditor needs comfort that the legal basis for recovery is solid. The Supreme Court ruling is public record, as is the CIT’s March 4 order. For companies that haven’t filed yet, auditors may want to see that the company has a plan and timeline for filing.
Management’s Assessment of Probability
You’ll need to document your company’s assessment of why recognition is appropriate — or why disclosure without recognition is the right treatment. This memo should address the ASC 450-20 criteria and explain your conclusion.
Completeness
Auditors will verify that you’ve identified all affected entries. If your assessment covers only a portion of your import activity during the IEEPA period, they’ll ask whether additional exposure exists.
Practical Examples
Example 1: Mid-Market Importer, Filed Claims
Facts: $3.2 million in IEEPA duties paid across 450 entries. Claims filed and in CAPE queue. Expected collection in 18-24 months.
Treatment: Recognize $3.2 million receivable ($2.1 million current, $1.1 million non-current) plus $96,000 in accrued statutory interest. Credit to reduction of COGS for duties related to goods sold, credit to inventory for duties on unsold goods.
Example 2: Large Importer, Hybrid Approach
Facts: $15 million in IEEPA duties. $10 million assigned for immediate capital at 85 cents on the dollar. $5 million filed through CAPE.
Treatment: Record $8.5 million cash received from claim assignment. Recognize $1.5 million loss on sale of receivable. Recognize $5 million receivable for CAPE-filed claims plus accrued interest.
Example 3: Small Importer, Early Stage
Facts: $200,000 in estimated IEEPA duties. Data not yet validated. No formal filing.
Treatment: Disclose as gain contingency. Note that recovery is probable but amount is not yet precisely determined. Describe plan and timeline for filing.
IFRS Considerations
While this article focuses on U.S. GAAP (ASC 450), some U.S. importers report under International Financial Reporting Standards — either because they’re subsidiaries of foreign parent companies or because they’ve voluntarily adopted IFRS.
Under IFRS, the relevant standard is IAS 37 (Provisions, Contingent Liabilities and Contingent Assets). The framework is similar to ASC 450 but with different terminology:
- Contingent asset: An asset arising from past events whose existence will be confirmed by uncertain future events not wholly within the entity’s control
- Recognition threshold: IAS 37 allows recognition of a contingent asset when the inflow of economic benefits is “virtually certain” — a higher bar than ASC 450’s “probable” threshold
- Disclosure threshold: IAS 37 requires disclosure when an inflow is “probable” (more likely than not)
For IEEPA refunds, the “virtually certain” threshold under IAS 37 may be met for claims that have been filed and are in the CAPE queue — particularly given the Supreme Court ruling’s finality and the CIT’s implementation orders. Claims that haven’t been filed may meet the disclosure threshold but not the recognition threshold under IFRS.
If your company reports under both U.S. GAAP and IFRS (dual reporting), the IEEPA refund may be recognized as a receivable under GAAP but only disclosed under IFRS, or vice versa. Coordinate with your auditor to ensure consistency in your dual-reporting framework.
Subsequent Events and Measurement Period Adjustments
For financial statements with a balance sheet date before the Supreme Court ruling (e.g., December 31, 2025 fiscal year-end financial statements issued after February 20, 2026), the ruling may qualify as a subsequent event under ASC 855.
Type I Subsequent Event (Recognized)
A Type I subsequent event provides additional evidence about conditions that existed at the balance sheet date. If IEEPA duty overpayments existed at December 31, 2025 (they did — the tariffs were unconstitutional from inception), the February 20 ruling confirms a condition that existed at year-end. Under this view, the refund should be recognized in the December 31, 2025 financial statements.
Type II Subsequent Event (Disclosed)
A Type II subsequent event arises from conditions that did not exist at the balance sheet date. Under this view, the Supreme Court ruling created new conditions (a definitive legal entitlement), and the appropriate treatment is disclosure, not recognition, in the December 31 financial statements.
The practical reality: Most auditors are treating the ruling as a Type II event — requiring disclosure but not recognition in pre-ruling financial statements. This means the refund first appears on the balance sheet in the first post-ruling reporting period (Q1 2026 for calendar year companies).
Companies that haven’t yet issued their 2025 annual financial statements should include a subsequent event disclosure describing the ruling and its expected financial impact.
Multi-Entity and Consolidated Reporting
For corporate groups where multiple entities import under separate importer of record numbers, the IEEPA refund may need to be recognized at the subsidiary level and flow through consolidation.
Key considerations:
- Each subsidiary’s refund is a separate claim based on its own entry data
- Intercompany transactions (where one entity imports and transfers goods to an affiliate) don’t change who has the refund claim — it’s always the importer of record
- Consolidation adjustments may be needed if the duty cost was allocated differently among entities than the refund will be received
- Transfer pricing implications should be evaluated if the original tariff costs were included in intercompany pricing
For corporate groups with significant IEEPA exposure across multiple entities, an Impact Assessment should be performed for each importer of record number to ensure complete coverage.
The Connection to Recovery Path Decisions
Your accounting treatment and your recovery path decision are interrelated. If you assign claims for immediate capital, the accounting is simpler — it’s a realized transaction. If you file through the government, you need to manage a receivable that could sit on your books for two or three years.
For companies where the accounting complexity of carrying a long-duration government receivable is a concern, the immediate capital option offers a cleaner balance sheet outcome. The cost of waiting analysis provides additional financial context for evaluating this trade-off.
The Bottom Line
For most importers with material IEEPA exposure, the Q2 2026 financial statements should include either a recognized receivable or a disclosed gain contingency. The Supreme Court ruling and CIT order have removed the legal uncertainty that would normally prevent recognition. The remaining work is quantifying your exposure, documenting your position, and getting your auditor comfortable with the treatment.
Start with the data. Everything else follows from knowing exactly what you’re owed.
