Nike 2010 Annual Report Download - page 70

Table of Contents NIKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
sourcing network, established customer relationships, and the United Soccer League Franchise. These intangible assets are amortized on a straight−line
basis over estimated lives of 12 to 20 years.
During fiscal 2009, the Company finalized the purchase−price accounting for Umbro and made revisions to preliminary estimates, including
valuations of tangible and intangible assets and certain contingencies, as further evaluations were completed and information was received from third parties
subsequent to the acquisition date. These revisions to preliminary estimates resulted in a $12.4 million decrease in the value of identified intangible assets,
primarily Umbro’s sourcing network, and an $11.2 million increase in non−current liabilities, primarily related to liabilities assumed for certain
contingencies and adjustments made to deferred taxes related to the fair value of assets acquired. These changes in assets acquired and liabilities assumed
affected the amount of goodwill recorded.
The following table summarizes the allocation of the purchase price, including transaction costs of the acquisition, to the assets acquired and liabilities
assumed at the date of acquisition based on their estimated fair values, including final purchase accounting adjustments (in millions):
May 31, 2008
Preliminary Adjustments May 31, 2009 Final
Current assets $ 87.2 $ — $ 87.2
Non−current assets 90.2 — 90.2
Identified intangible assets 419.5 (12.4) 407.1
Goodwill 319.2 23.6 342.8
Current liabilities (60.3) — (60.3)
Non−current liabilities (279.4) (11.2) (290.6)
Net assets acquired $ 576.4 $ — $ 576.4
The pro forma effect of the acquisition on the combined results of operations for fiscal 2008 was not material.
Umbro Impairment in Fiscal 2009
The Company performs annual impairment tests on goodwill and intangible assets with indefinite lives in the fourth quarter of each fiscal year, or
when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit or intangible assets with an indefinite
life below its carrying value. As a result of a significant decline in global consumer demand and continued weakness in the macroeconomic environment, as
well as decisions by Company management to adjust planned investment in the Umbro brand, the Company concluded sufficient indicators of impairment
existed to require the performance of an interim assessment of Umbro’s goodwill and indefinite lived intangible assets as of February 1, 2009. Accordingly,
the Company performed the first step of the goodwill impairment assessment for Umbro by comparing the estimated fair value of Umbro to its carrying
amount, and determined there was a potential impairment of goodwill as the carrying amount exceeded the estimated fair value. Therefore, the Company
performed the second step of the assessment which compared the implied fair value of Umbro’s goodwill to the book value of goodwill. The implied fair
value of goodwill is determined by allocating the estimated fair value of Umbro to all of its assets and liabilities, including both recognized and
unrecognized intangibles, in the same manner as goodwill was determined in the original business combination.
The Company measured the fair value of Umbro by using an equal weighting of the fair value implied by a discounted cash flow analysis and by
comparisons with the market values of similar publicly traded companies. The Company believes the blended use of both models compensates for the
inherent risk associated with either
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