For the past two years, tariffs have been a supply-chain conversation: which inputs are affected, how long the surcharges might last, whether to re-source, whether to pass costs through to customers. In the run-up to the 2026 audit cycle, that conversation has quietly moved into the controller’s office. Tariffs are now a financial-reporting issue, and KPMG, Deloitte, and the AICPA have all published guidance pointing in the same direction: the effect of tariffs needs to be evaluated not just operationally, but in the audited financial statements themselves.
For Florida manufacturers, the issue lands in several places at once. Inventory cost layers may now include duty components that change the calculation of cost of goods sold and the carrying value of finished goods. Long-term supply contracts may need to be re-examined for onerous-contract considerations. Forecasted covenant compliance, particularly debt-service-coverage and fixed-charge-coverage ratios, may move materially. And the February 20, 2026 federal court decision on certain tariff authorities introduced a fresh wave of ASC 855 subsequent-event evaluation questions for calendar-year filers.
Where this shows up in the year-end engagement
Inventory and cost of goods sold are the most obvious. Manufacturers with meaningful imported component costs are seeing tariff layers move through WIP and into finished goods at different rates, which complicates standard-cost systems and variance analysis. Auditors are spending more time understanding how the company has tracked, allocated, and rolled tariff costs into inventory — and whether the resulting carrying value is supportable.
Less obvious is the deferred-tax impact. Where a company has booked deferred tax assets supported by projected future taxable income, tariffs that compress forward margins can trigger a fresh look at valuation allowances under ASC 740. And on the disclosure side, management’s discussion of tariff exposure has become a topic auditors are explicitly asking about, even for closely-held companies whose statements are read primarily by lenders rather than the public markets.
“Tariffs aren’t just a margin story anymore. They’re an inventory story, a deferred-tax story, a covenant-projection story, and a subsequent-event story — sometimes all in the same engagement.”
Why bank covenants are the leverage point
For Florida manufacturers and distributors that finance working capital through asset-based lines or revolvers, the audited financial statements are read first by the lender. Covenants that were comfortably met a year ago can sit much closer to their thresholds once tariff-driven margin compression and inventory revaluation are reflected. That is why the 2026 audit conversation increasingly starts with the covenant package: which ratios apply, what definitions the lender used, and whether the financial statements as currently structured will support the compliance certificate that has to be filed alongside them.
None of these issues are insurmountable, but they require a more deliberate year-end planning process than many Florida manufacturers have historically run. The companies that begin those conversations in the first half of the year tend to arrive at fieldwork without surprises — which, in a tariff-disrupted environment, is the single biggest thing a controller can do to keep the audit on schedule.
