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Table of Contents NIKE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate follows:
Year Ended May 31,
2010 2009 2008
Federal income tax rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 1.3% 1.2% 1.4%
Foreign earnings −13.6% −14.9% −12.9%
Other, net 1.5% 2.7% 1.3%
Effective income tax rate 24.2% 24.0% 24.8%
The effective tax rate for the year ended May 31, 2010 of 24.2% increased from the fiscal 2009 effective rate of 24.0%. The effective tax rate for the
year ended May 31, 2009 was favorably impacted by a tax benefit associated with the impairment of goodwill, intangible, and other assets of Umbro (See
Note 4 — Acquisition, Identifiable Intangible Assets, Goodwill and Umbro Impairment), and the retroactive reinstatement of the research and development
tax credit. The Tax Extenders and Alternative Minimum Tax Relief Act of 2008, which was signed into law during the second quarter of fiscal 2009,
reinstated the U.S. federal research and development tax credit retroactive to January 1, 2008. Also reflected in the effective tax rate for the years ended
May 31, 2010, 2009 and 2008 is a reduction in our on−going effective tax rate resulting from our operations outside of the United States, as our tax rates on
those operations are generally lower than the U.S. statutory rate.
Deferred tax assets and (liabilities) are comprised of the following:
May 31,
2010 2009
(In millions)
Deferred tax assets:
Allowance for doubtful accounts $ 16.7 $ 17.9
Inventories 47.3 52.8
Sales return reserves 52.0 52.8
Deferred compensation 143.7 127.3
Stock−based compensation 145.0 127.3
Reserves and accrued liabilities 85.8 66.7
Foreign loss carry−forwards 26.2 31.9
Foreign tax credit carry−forwards 148.3 32.7
Hedges 0.4 1.1
Undistributed earnings of foreign subsidiaries 128.4 272.9
Other 37.0 46.2
Total deferred tax assets 830.8 829.6
Valuation allowance (36.2) (26.0)
Total deferred tax assets after valuation allowance 794.6 803.6
Deferred tax liabilities:
Property, plant and equipment (99.3) (92.2)
Intangibles (98.6) (100.7)
Hedges (71.5) (86.6)
Other (8.1) (4.2)
Total deferred tax liability (277.5) (283.7)
Net deferred tax asset $ 517.1 $ 519.9
76