Navigating Year-End: Key Financial and Tax Considerations for Manufacturers

This year has been defined by rapid change and economic uncertainty. From shifting global trade policies to sweeping tax reforms, manufacturers have navigated a complex landscape that’s reshaping how they operate and report. Entering the last quarter of the year, it’s critical to prepare for fiscal year-end with a clear understanding of the emerging risks, evolving reporting requirements and strategic opportunities ahead.

Q4 Checklist: What Financial Statement Risks Should Manufacturers Monitor?

Manufacturers should evaluate several key areas before closing the books:

• Inventory Valuation: Tariffs have driven up inventory costs. If net realizable value (NRV) falls below cost, inventory impairment may be necessary.
• Asset Impairments: Reduced cash flows from tariff impacts could trigger impairment testing for long-lived assets and goodwill.
• Revenue Recognition: Changes in transaction prices or contract terms due to tariffs may require reassessment of revenue recognition and identification of loss contracts.
• Going Concern: Liquidity constraints may raise substantial doubt about the company’s ability to continue operations.

How Manufacturers Can Ensure Disclosure Readiness

Start preparing now to ensure your disclosures are complete and transparent:

• Clearly outline tariff-related risks, including impacts on margins, working capital, liquidity, and operations.
• Address going concern assessments and management’s mitigation strategies.
• Update estimates related to fair value, NRV and revenue recognition.

Common Pitfalls and Reporting Challenges to Address in Q4

Many manufacturers are struggling to capture the financial impact of tariffs accurately. Key challenges include:

• Estimating tariff costs for long-term contracts and Bill of Materials (BOM)
• Determining fair value in volatile markets
• Knowing when to assess for impairment, especially when tariffs are proposed but haven’t taken effect
• Dealing with fragmented data spread across procurement, finance and operations

To prepare for the close of the fiscal year, manufacturers can consider, in the immediate term, front-loading imports ahead of anticipated tariff changes, applying for available exemptions, renegotiating supplier terms, reassessing pricing strategies and mapping tariff exposure across their value chain. Looking further ahead to 2026, businesses should implement cost tracking for tariff-impacted SKUs, explore the use of bonded warehouses or Foreign Trade Zones (FTZs), adjust forecasts and budgets to reflect evolving cost structures, and conduct scenario planning. Additionally, manufacturers may benefit from restructuring debt to take advantage of falling interest rates and improve liquidity heading into the new year.

What Tax Reform Opportunities Are Available to Manufacturers?

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, extended several tax incentives and introduced others aimed at revitalizing domestic manufacturing:

• 100% Bonus Depreciation: Immediate deduction for eligible equipment and property made permanent.
• Expanded Section 179 Expensing: Increased limits for new and used equipment.
• Immediate R&D Expensing: Restoration of full deduction for domestic R&D costs. Potential for qualifying “small” businesses to apply retroactively.
• Qualified Business Income Deduction (QBID): 20% deduction permanently extended.
• New Manufacturing Facility Deduction: Immediate deduction of qualified production property.
• Eased Interest Deduction Limits: Makes borrowing more affordable.
• Expanded Small Business Stock Gain Exclusion: New tiered holding period structure for stock acquired after July 4, 2025.

Tax Planning Considerations:

Now is the time to revisit short and long-term tax strategies around:

• Facility investments
• R&D budgeting
• Financing decisions
• Entity structure optimization

Preparing for a Successful Year-End

As we close out Q3 and head into Q4 of 2025, proactive planning is essential. Manufacturers should assess financial risks, prepare relevant disclosures, and capitalize on new and enhanced tax incentives to position themselves for a stronger 2026. If you have questions or need support navigating these changes, our Manufacturing team is here to help.