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Ext. PublicationStaying Ahead in a Shifting Landscape: Tariff Strategy, Tax Reform and Accounting Updates
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In Weaver’s Q2 2025 Accounting and SEC Update webinar, our professionals offered critical insights into tariffs, tax policy and accounting standards. They examined the effects of tariffs on operational, transfer pricing strategies and disclosure considerations before summarizing key business and individual tax impacts of the federal tax legislation known as the One Big Beautiful Bill Act (OBBBA). For current and detailed information about the OBBBA, register for Weaver’s One Big Beautiful Bill Act webinar series.
The following summary of the webinar covers issues related to tariffs, including financial reporting for companies, and highlights upcoming Accounting Standards Updates (ASUs).
Tariffs, Transfer Pricing and Financial Reporting Considerations
In recent months, new tariffs have affected a wide range of U.S. businesses — even those without global operations. Tariffs are more than a trade policy issue. They present tax, operational and financial reporting challenges. As enforcement tightens and global supply chains evolve, finance teams need to identify their exposure and minimize risk.
Two Sets of Rules, One Complex System
Tariffs and taxes may seem similar, but they are governed separately. Often considered a form of taxation, a tariff is an ad valorem or specific rate of duty applied to imported goods that is collected by the U.S. Customs and Border Protection (CBP), not the Internal Revenue Service (IRS).
CBP uses its own specific customs valuation methodologies and priority of methodologies that can create variance from the outcomes of IRS transfer pricing methodologies applied for income tax purposes. CBP has remit over all imports, while the IRS transfer pricing regulations are primarily concerned with related-party imports. Related-party imports are not able to apply CBP’s highest priority transaction value method and require related parties to use an alternative customs valuation method.
Additionally, common year-end transfer pricing adjustments based on entity level, profit-based methods may create mismatches with previously declared customs values. This can generate compliance confusion and financial reporting risks.
Strategic Responses: Reducing Tariff Exposure
Businesses likely to be affected by new tariffs are seeking options to reduce their exposure. While there is still a great deal of uncertainty, below are some actions businesses can take or investigate.
- Understand the supply chain and negotiate your position. Companies should review whether they will need to absorb costs, can negotiate to share costs with suppliers or have the ability to pass additional costs on to customers.
- Leverage free trade zones (FTZs) or bonded warehouses for cash flow purposes to alleviate uncertainty while also controlling the timing of duty payments.
- Explore First Sale for Export (FSFE). If transactions are qualified for FSFE, U.S. importers can declare the import value based on the first transaction price from the manufacturer instead of the higher purchase price paid to a foreign intermediary or principal entity. Note, FSFE involves specific qualification considerations and will be more difficult to qualify for related party transactions.
- Consider having a U.S. importer of record to benefit from distribution related costs being excluded from dutiable value.
- Convert foreign manufacturing principal to contract manufacturing characterization through de-risking and moving IP.
- Consider embedded IP (or services) by unbundling values and separating to limit the portion subject to tariffs.
Watch for state and local tax impacts: The states of New Jersey, California, Illinois, Washington and Wisconsin have issued guidance confirming import tariffs passed on to customers may be subject to sales tax. Other states are likely to follow. Businesses that import goods and pass tariffs on to customers should examine how those charges are listed on the invoice and assess whether they should be included in the taxable sales price. Sales tax software and billing processes should be examined to ensure that they correctly apply sales or use tax to tariff-related charges where required.
Take practical steps to prepare. Mapping global supply chains and global value chains will create a better understanding of the pieces that come into play and uncover important data points for taxation purposes.
- Determine who is responsible for customs compliance within supply chains. Consider country of origin for inputs and finished goods. Ensure optimal composition and content consideration of imported goods.
- Review customer and vendor contracts to identify the entity in the supply chain that legally bears the economic impact of tariff costs.
- Download Automated Commercial Environment (ACE) data from the CBP to understand historical classifications. Review current classifications to ensure appropriate and most favorable Harmonized Tariff Schedule (HTS) classification.
- Analyze the income tax and other tax implications of current global supply chains and global value chains.
- Identify cross-functional leaders and external advisors needed to model and assess the feasibility of alternatives.
How Should Companies Address Tariffs in their Financial Disclosures?
With so much uncertainty around what actions could affect their financials, companies that are or may be significantly impacted will need to consider what incremental information should be disclosed in their periodic (e.g., forms 10-Q or 10-K) or other (e.g., Form 8-K) filings.
One of the areas companies often fall short is in their Management’s Discussion and Analysis (MD&A). The SEC has stated that if a company cannot assess the likelihood of a material event, such events are required to be disclosed “if a reasonable investor would consider omission of the information as significantly altering the mix of information made available in the registrant’s disclosures.”
Areas of financial statements where these disclosures may be required include Forward-Looking Information, Results of Operations, Liquidity and Capital Resources, Quantitative and Qualitative Disclosures About Market Risks and Segment Impacts.
Potential triggers in Form 8-K include, but are not limited to:
- Item 1.01: Entry into or termination of a material definitive agreement
- Item 2.05: Costs associated with exit or disposal activities
- Item 2.06: Material impairment of asset
It will be important for companies to work with legal counsel and financial reporting teams to understand all the different ways tariffs may affect their business and incorporate these impacts in their financial statements in meaningful ways. Examples of disclosures on slides 14-19 in the webinar show how businesses are discussing the actual or potential effects of tariffs on a company’s inventory and operations in financial disclosures.
Tax Policy: The One Big Beautiful Bill Act
In the webinar, we discussed tax law changes proposed as part of negotiations leading up to the adoption of what has become known as The One Big Beautiful Bill Act. Following substantial revisions after June 19, President Trump signed the bill into law on July 4, 2025.
Weaver’s tax professionals will break down key elements of the law as it was finally passed in our One Big Beautiful Bill Act webinar series. The series will also be available for replay and will offer more information about key provisions impacting businesses and individuals.
ASUs on the Horizon
Many of this year’s Accounting Standards Updates (ASUs) maintain an ongoing trend among regulators to require more meaningful, streamlined financial reporting disclosure. Organizations are encouraged to think ahead about how operations are presented and explained to stakeholders to support greater overall transparency for investors and the public.
ASU 2025-02 was issued following the release of the SEC’s Staff Accounting Bulletin (SAB) 122, which replaced SAB 121, easing some of the requirements around custodial digital asset accounting. Companies no longer need to show gross presentation of assets and liabilities for crypto custody arrangements. Instead, they must assess and disclose risk-of-loss exposures.
ASU 2025-02 requires the recognition of a liability related specifically to the risk of loss associated with the counterparties by applying ASC 450 — Contingencies, Loss Recoveries and Guarantees. It applies on a fully retrospective basis to annual periods beginning after December 15, 2024.
ASU 2025-03 is intended to align VIE acquisitions with broader business combination principles, enhancing comparability. It impacts entities involved in acquiring VIEs when the VIE meets the definition of a business. It removes the current default rule that the primary beneficiary is always the accounting acquirer. Companies involved in an acquisition that involves exchanging equity interests will need to determine accounting acquirer considering ASC 805-10-55-12 through 55-15. ASU 2025-03 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted.
ASU 2025-04 addresses the handling of share-based consideration given to customers. It revises the definition of a “performance condition” and removes a forfeiture policy election for service conditions associated with share-based consideration payable to a customer. It clarifies that the guidance in ASC 606 on variable consideration constraint does not apply to share-based consideration payable to a customer, irrespective of whether an award’s grant date has occurred, as determined under ASC 718. Thus, the grantor must evaluate the probability that an award will vest using only the guidance in Topic 718.
Revenue recognition will not be delayed when awards are granted but are not expected to vest. ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted.
New Current and Future ASU Requirements
Keep in mind that there are some ASUs discussed in previous webinars that are applicable now and should be on your radar. Most are not drastic changes from what companies are already doing, but they do expand and clarify requirements for public and private companies. Also, there are other ASUs on the horizon that we will look at more closely in upcoming webinars.
Weaver Can Help
Weaver’s accounting and tax advisors offer companies several ways to sharpen their focus on upcoming accounting and tax regulations. Join our tax professionals as they examine key elements of the recent historic federal tax legislation in the One Big Beautiful Bill Act webinar series on July 15, 17, 22, 24 and 29. Sign up for Weaver’s Quarterly Accounting and SEC Update webinars, podcasts and the Executive Resource Center. To discuss your unique circumstances, we encourage you to contact us directly to schedule a consultation.
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