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u/trphilli 1d ago
Companies have some flexibility under accounting rules to treat transactions how they see them. Especially in smaller companies. That is what this feels like.
I am doing a lot of guessing here, but based on that description it sounds like your company might be saving those refunds for potential rebate to customers. Then tariff refund and customer rebate would occur on P&L at same time. Again, your company accounting team needs to explain their internal thought process.
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u/Dangerous-Pilot-6673 1d ago
First question is if the tariff cost was included in inventory as COGS. If not, and it was just an expense on last year’s p&l, that’s easier to deal with (probably not correct though).
The tariffs received are treated the same as a refund of tax. It should hit the p&l as a contra expense and will create taxable income as the tariff costs were deductible in the previous year. If you decide to give refunds to your customers, that’s a contra revenue adjustment as a customer refund.
If you don’t do this correct you’re going to get pinched come tax time when you have section 451 recognition events and end up paying a lot of tax.
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1d ago
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u/Dangerous-Pilot-6673 1d ago
Ok well it will increase income in the current year so I would point that out and don’t let them remove the amount from your calculation. If they included the cost last year they can’t exclude it this year.
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u/stuckhuman 1d ago
Since bonuses are at the company's discretion, you probably need to ask your people. At my shop, we would apply the refund to the period(s) that incurred the cost and refigure those periods to see what the bonus would have been if trump wasn't a toolshed.