TheCorporateCounsel.net

Tariffs are certain to be a hot topic for boards and audit committees, and this GrantThornton memo has some thoughts about the kind of tariff-related issues that boards and audit committees will want management to address:

Boards and audit committees will likely demand risk assessments related to tariffs – including scenario analyses and contingency plans. They may also want assurance that management is monitoring early warning signals of policy change (e.g. following Treasury announcements, engaging trade counsel). Strategic partnerships or joint ventures create new risks and monitoring requirements that should be of interest to audit committees. Finally, some companies are looking into trade disruption insurance, including policies that cover losses due to supply chain disruption. Legal and risk advisors should review contract clauses, and new contracts might explicitly include or exclude tariffs as force majeure events.

In addition to audit committee oversight, the memo observes that internal and outside auditors will look closely at how tariffs impact corporate balance sheets and income statements. For instance, the need to reflect duties paid in the value of inventory on the balance sheet could squeeze margins to the point where inventory write-downs are necessary. On the income statement side, determining the transaction price for revenue recognition purposes could be affected if surcharges or passthrough charges are implemented.

– John Jenkins