The Financial Accounting Standards Board (FASB) issued one new Accounting Standards Update (ASU) in the third quarter of 2026. The Governmental Accounting Standards Board (GASB) did not issue a new statement during the quarter, but it did issue Implementation Guide No. 2026-1. This issue of The Rundown summarizes that new guidance and highlights accounting considerations for tariff refunds, including the American Institute of Public Accountants (AICPA)’s recently issued technical Q&A and practical evidence considerations for determining when a refund may be probable or realized or realizable. For summaries of standards issued in previous periods, view our previous Rundowns online.
In addition, we have retained the comprehensive listing of standards newly effective for calendar year-end December 31, 2026, broken down by public business entities, private entities, and governmental entities. The June 30, 2026, governmental list is also included for reference.
Third Quarter 2026 Newly Issued Standards
ASU 2026-03: Investment Companies With Equity Securities Subject to Contractual Sale Restrictions
Background
In June of 2022, the FASB issued ASU 2022-03, which clarified that a contractual restriction on the sale of an equity security is not a characteristic of the security’s unit of account and, therefore, should not be considered in measuring fair value. Stakeholders, particularly those tied to investment companies, indicated that this results in fair value measurements that do not reflect how market participants would value equity securities that are subject to contractual sale restrictions, which distorts net asset value (NAV), performance reporting, management fees, etc.
Changes
ASU 2026-03 creates a narrow exception for investment companies within the scope of ASC 946. When an investment company holds an equity security that is measured at fair value, and the investment company is contractually prohibited from selling that security on the measurement date, the investment company must consider the effect of the contractual sale restriction in measuring fair value. Changes include:
- The exception applies only to investment companies within the scope of ASC 946. The ASU 2022-03 model continues to apply to other entities.
- The fair value adjustment should reflect the incremental effect of the restriction from a market-participant perspective. The update does not prescribe a valuation model or a standard discount.
- The restriction does not create a new fair value hierarchy category. Classification continues to depend on the observability and significance of the inputs used in the measurement.
- Entities should avoid double-counting liquidity effects or applying a blockage discount based solely on the size of the holding.
- Companies should disclose the amount of the discount attributable to the contractual sale restriction.
Effective Date and Transition
The amendments are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual periods. Early adoption is permitted on or after the issuance date. The guidance is applied prospectively to restricted equity securities held on the adoption date, with the adoption-date adjustment recognized in current-period earnings.
GASB Implementation Guide No. 2026-1: Financial Reporting Model Improvements —Subsidies
Background and Changes
The guide provides question-and-answer guidance that clarifies what constitutes a subsidy under GASB Statement No. 103, Financial Reporting Model Improvements. If an amount is deemed a subsidy, then the classification and presentation differ, which is the importance of the clarification.
A subsidy is presented in a dedicated line item titled “Noncapital subsidies” immediately below operating income or loss on the Statement of Revenues, Expenses, and Changes in Fund Net Position. The guidance applies to proprietary fund financial statements of state and local governments and to governmental business-type activities (BTA). Specifically, the guidance clarifies the following:
- Donations received by a higher education institute that will be used to award scholarships are a form of subsidy, regardless of whether published tuition rates are changed as a result.
- Judgment should be applied to research grants received by higher education institutes. If the grantor does not receive a good or service in exchange and the proceeds directly or indirectly keep current or future tuition lower than they otherwise would be, then the grant would constitute a subsidy.
- Tax revenue received by a governmental BTA would likely be considered a subsidy.
- Passenger Facility Charges received by an airport would meet the definition of a subsidy.
- Capital subsidies should be presented in “Other nonoperating revenues and expenses.”
- Subsidies received by a proprietary or BTA whose use is limited to capital-related debt should be classified as a capital subsidy.
- Subsidies received that were, or will be, used for acquisition of capital assets but were not required to be used for capital assets should be considered noncapital subsidies. Only when externally imposed limitations on the use of a subsidy for capital purposes would such a subsidy be considered a capital subsidy.
Effective Date
The guide is effective for fiscal years beginning after June 15, 2026, and all reporting periods thereafter and applied retroactively as a change in accounting principles. Earlier application is encouraged if Statement 103 has been implemented.
Practice Insight: Accounting for Tariff Refunds
The AICPA recently issued a technical Q&A addressing the accounting for potential tariff recoveries. The Q&A acknowledges that U.S. Generally Accepted Accounting Principles (GAAP) does not contain a single model written specifically for tariff refunds. Depending on the facts and circumstances, an entity may apply either a loss-recovery model by analogy to ASC 410-30 and ASC 450-20 or the gain-contingency model in ASC 450-30. The selected model should be applied consistently to similar facts and circumstances.
Selecting the Recognition Model
|
Model |
Recognition Threshold |
Practical Consequence |
|
Loss recovery |
Recognize when recovery is probable and reasonably estimable |
Recognition may occur before cash receipt, but the conclusion requires persuasive evidence that collection is likely and the amount can be estimated. |
|
Gain contingency |
Recognize when the gain is realized or realizable |
Recognition generally occurs later, because substantially all uncertainty about realization must be resolved. Cash receipt clearly qualifies, but an unconditional claim to a known amount of cash may also support recognition. |
Tariff refunds under the International Emergency Economic Powers Act (IEEPA) are requested through U.S. Customs and Border Protection’s (CBP) Consolidated Administration and Processing of Entries (CAPE) system, which tracks claims from initial submission through entry-level recalculation, liquidation or reliquidation, transmission to Treasury, and ultimately payment by ACH. For those who might not be familiar with some of this terminology:
- An “entry” is simply a shipment of imported goods for which documentation is filed with CBP to obtain release and determine the applicable duties, taxes, and fees.
- A “liquidation” is CBP’s final computation of the duties, taxes, fees, and other amounts owed for an entry. Once liquidation occurs, an importer generally has 180 days to contest CBP’s determination by filing a protest.
- A “reliquidation” is CBP’s subsequent revision of a previously liquidated entry, resulting in a new final determination of the amounts owed or refundable. The reliquidation replaces the prior liquidation and is itself subject to protest.
As a claim advances through different stages of the CAPE system, the available evidence becomes progressively stronger for determining whether the refund is probable and reasonably estimable under a loss-recovery model or realized or realizable under a gain-contingency model. The AICPA Q&A does not prescribe the point in the administrative refund process at which “probable” or “realized or realizable” is achieved. The conclusion remains judgmental and fact specific.
As a result, practitioners have raised questions about what stage(s) within the CAPE system a refund can be considered “probable” or “realized or realizable”. While there is no definitive guidance, the following CAPE stages provide a practical evidentiary framework that may be appropriate. The table below is based on our own research and interpretations.
CAPE Evidence Stages
|
Stage |
Description/Evidence Available |
Estimable? |
Loss Recovery Model: Probable? |
Gain Contingency Model: Realized/Realizable? |
|
1. CAPE Claim Number Issued |
Procedural validation and eligibility to continue processing; no approved dollar amount. Can be viewed w/in the CAPE File Upload History or the Claim Status subtab. |
No |
No |
No |
|
2. Entry-level Removal and Recalculation |
CBP removes IEEPA tariff lines and recalculates the entry, including interest due to the importer. Can be viewed in the ES-022 CAPE Entry Summary Report. |
Yes |
Debatable (FN 1) |
No |
|
3. Liquidated or Reliquidated Without IEEPA Duties |
CBP has made its administrative determination that IEEPA tariffs should not be applied. Technically, the CBP has a 90-day correction window hereafter. Can be viewed in the ES-701 liquidation report. |
Yes |
Yes, if outside of the 90-day correction window. If not, then judgmental whether the likelihood of CBP correcting or reversing the refund is sufficiently low that recovery remains probable. |
No |
|
4. REV-615 Shows Refund Transmitted to Treasury |
The claim is tied to individual entries, and Treasury has been queued to disburse the refund. Can be viewed in the REV-615 CAPE Details Refunds Report. |
Yes |
Yes |
Yes; analogous to a settled claim awaiting payment. |
|
5. ACH Deposit Received |
Cash is received in the entity’s bank account. |
Yes |
Yes |
Yes |
In their June 2, 2026, appeal, the Department of Justice (DOJ) only disputed tariff refunds for entries that are more than 180 days past liquidation (i.e., have reached “final liquidation”) and the importer has not yet filed a case with the U.S. Court of International Trade (CIT). Therefore, a case could be made that under the loss recovery method "probable" has been achieved at this stage given:
- (a) legal risk is resolved
- (b) the entry amount is now computed
- (c) only operational validation remains.
However, until the entry completes stage three, it's still reasonably possible that during operational validation all or part of the refund will be invalidated.
Partial receipts should be evaluated claim-by-claim or entry-by-entry. Receipt of some refunds does not automatically establish recognition for all refunds claimed.
Classification and Measurement
The AICPA Q&A indicates that it will generally be appropriate to record tariff recovery in the same manner as the tariff was originally recorded. Accordingly:
- If inventory is still on hand, reduce the carrying amount of the related inventory.
- If inventory has already sold, generally reduce the cost of goods sold. If the effect relates to tariffs recognized in prior-period cost of sales, presentation and disclosure require careful consideration. Clear disclosure of the current-period reduction to cost of goods sold is important, and we recommend practitioners consider presenting refunds as “other income” instead of contra cost of goods sold. At a minimum, if the amounts are material and presented as contra cost of goods sold, that fact and the amount needs to be disclosed.
- For property, plant, and equipment, reduce the asset cost basis and evaluate the related depreciation effect.
- For other capitalized assets, reduce the related asset while it remains recognized; if the asset has been expensed, consider the income statement line item through which it was derecognized.
Customers and Pass-Through Tariffs
The accounting for an entity’s contractual, legal, or implied obligation to refund tariff amounts to customers should be accounted for under ASC 606 Revenue from Contracts with Customers and its recognition is separate from recognition of the entity’s receivable from CBP under either the loss recovery or gain contingency models. This is critical because, depending upon what recognition model an entity chooses, it’s possible a customer refund liability may be recognized before the entity recognizes a tariff refund asset from the government. For example, if an entity applies the gain contingency model, a refund from CBP would not be recognized until realized or realizable. However, under ASC 606, if a potential refund to a customer is considered variable consideration, then the threshold for recognition is “probable.”
Disclosures
Entities should disclose what model was used to determine recognition of any IEEPA tariff-related refunds (i.e., loss, recovery, or gain contingency) and apply the applicable disclosure requirements of that model. Additionally, they should consider the disclosure requirements of FASB ASC 606, Revenue From Contracts With Customers, for any potential refunds of IEEPA tariffs to customers.
Entities should also consider the disclosure requirements of FASB ASC 855, Subsequent Events, when evaluating the impacts of events related to tariff refunds that occur after the end of the reporting period and before the entity’s issuance of its financial statements.
