Nike 2015 Annual Report Download - page 38

PART II
(3) We generally order product at least four to five months in advance of sale based primarily on futures orders received from customers. The amounts listed for product purchase obligations
represent agreements (including open purchase orders) to purchase products in the ordinary course of business that are enforceable and legally binding and that specify all significant
terms. In some cases, prices are subject to change throughout the production process. The reported amounts exclude product purchase liabilities included in Accounts payable on the
Consolidated Balance Sheet as of May 31, 2015.
(4) Other amounts primarily include service and marketing commitments, including marketing commitments associated with endorsement contracts, made in the ordinary course of business.
The amounts represent the minimum payments required by legally binding contracts and agreements that specify all significant terms, including open purchase orders for non-product
purchases. The reported amounts exclude those liabilities included in Accounts payable or Accrued liabilities on the Consolidated Balance Sheet as of May 31, 2015.
The total liability for uncertain tax positions was $438 million, excluding related interest and penalties, at May 31, 2015. We are not able to reasonably estimate
when or if cash payments of the long-term liability for uncertain tax positions will occur.
We also have the following outstanding short-term debt obligations as of May 31, 2015. Refer to Note 7 — Short-Term Borrowings and Credit Lines in the
accompanying Notes to the Consolidated Financial Statements for further description and interest rates related to the short-term debt obligations listed below.
(In millions)
Outstanding as
of May 31, 2015
Notes payable, due at mutually agreed-upon dates within one year of issuance or on demand $ 74
Payable to Sojitz America for the purchase of inventories, generally due 60 days after shipment of goods from a foreign port 78
As of May 31, 2015, the Company had letters of credit outstanding totaling $165 million. These letters of credit were issued primarily for the purchase of inventory
and as guarantees of the Company’s performance under certain self-insurance and other programs.
Recently Adopted Accounting Standards
In July 2013, the Financial Accounting Standards Board (“FASB”) issued an
accounting standards update intended to provide guidance on the
presentation of unrecognized tax benefits, reflecting the manner in which an
entity would settle, at the reporting date, any additional income taxes that
would result from the disallowance of a tax position when net operating loss
carryforwards, similar tax losses or tax credit carryforwards exist. This
accounting standard was effective for us beginning June 1, 2014 and early
adoption was permitted. We early adopted this guidance and the adoption
did not have a material impact on our consolidated financial position or results
of operations.
In July 2012, the FASB issued an accounting standards update intended to
simplify how an entity tests indefinite-lived intangible assets other than
goodwill for impairment by providing entities with an option to perform a
qualitative assessment to determine whether further impairment testing is
necessary. This accounting standard update was effective for us beginning
June 1, 2013. The adoption of this standard did not have a material impact on
our consolidated financial position or results of operations.
In December 2011, the FASB issued guidance enhancing disclosure
requirements surrounding the nature of an entity’s right to offset and related
arrangements associated with its financial instruments and derivative
instruments. This new guidance requires companies to disclose both gross
and net information about instruments and transactions eligible for offset in
the statement of financial position and instruments and transactions subject
to master netting arrangements. This new guidance was effective for us
beginning June 1, 2013. As this guidance only requires expanded
disclosures, the adoption had no impact on our consolidated financial
position or results of operations.
Recently Issued Accounting Standards
In May 2014, the FASB issued an accounting standards update that replaces
existing revenue recognition guidance. The updated guidance requires
companies to recognize revenue in a way that depicts the transfer of
promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those
goods or services. In addition, the new standard requires that reporting
companies disclose the nature, amount, timing and uncertainty of revenue
and cash flows arising from contracts with customers. Based on the FASB’s
decision in July 2015 to defer the effective date and to allow more flexibility
with implementation, we anticipate the new standard will be effective for us
beginning June 1, 2018. The new standard is required to be applied
retrospectively to each prior reporting period presented or retrospectively with
the cumulative effect of initially applying it recognized at the date of initial
application. We have not yet selected a transition method and are currently
evaluating the effect the guidance will have on our consolidated financial
position or results of operations.
Critical Accounting Policies
Our previous discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure
of contingent assets and liabilities.
We believe that the estimates, assumptions and judgments involved in the
accounting policies described below have the greatest potential impact on
our financial statements, so we consider these to be our critical accounting
policies. Because of the uncertainty inherent in these matters, actual results
could differ from the estimates we use in applying the critical accounting
policies. Certain of these critical accounting policies affect working capital
account balances, including the policies for revenue recognition, the
allowance for uncollectible accounts receivable, inventory reserves and
contingent payments under endorsement contracts. These policies require
that we make estimates in the preparation of our financial statements as of a
given date. However, since our business cycle is relatively short, actual results
related to these estimates are generally known within the six-month period
following the financial statement date. Thus, these policies generally affect
only the timing of reported amounts across two to three fiscal quarters.
Within the context of these critical accounting policies, we are not currently
aware of any reasonably likely events or circumstances that would result in
materially different amounts being reported.
NIKE, INC. 2015 Annual Report and Notice of Annual Meeting 99
FORM 10-K