Nike 2015 Annual Report Download - page 52

PART II
NOTE 1 — Summary of Significant Accounting Policies
Description of Business
NIKE, Inc. is a worldwide leader in the design, development and worldwide
marketing and selling of athletic footwear, apparel, equipment, accessories
and services. NIKE, Inc. portfolio brands include the NIKE Brand, Jordan
Brand, Hurley and Converse. The NIKE Brand is focused on performance
athletic footwear, apparel, equipment, accessories and services across a
wide range of sport categories, amplified with sport-inspired sportswear
products carrying the Swoosh trademark as well as other NIKE Brand
trademarks. The Jordan Brand is focused on athletic and casual footwear,
apparel and accessories, using the Jumpman trademark. Sales of Jordan
Brand products are included within the NIKE Brand Basketball category. The
Hurley brand is focused on surf and action sports and youth lifestyle footwear,
apparel and accessories, using the Hurley trademark. Sales of Hurley brand
products are included within the NIKE Brand Action Sports category.
Converse designs, distributes, markets and sells casual sneakers, apparel
and accessories under the Converse, Chuck Taylor, All Star, One Star, Star
Chevron and Jack Purcell trademarks. In some markets outside the U.S.,
these trademarks are licensed to third parties who design, distribute, market
and sell similar products. Operating results of the Converse brand are
reported on a stand-alone basis.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of NIKE, Inc.
and its subsidiaries (the “Company”). All significant intercompany transactions
and balances have been eliminated.
The Company completed the sale of Cole Haan during the third quarter
ended February 28, 2013 and completed the sale of Umbro during the
second quarter ended November 30, 2012. As a result, the Company reports
the operating results of Cole Haan and Umbro in the Net income from
discontinued operations line in the Consolidated Statements of Income for all
applicable periods presented. There were no assets or liabilities of
discontinued operations as of May 31, 2015 and May 31, 2014 (refer to
Note 15 — Discontinued Operations). Unless otherwise indicated, the
disclosures accompanying the Consolidated Financial Statements reflect the
Company’s continuing operations.
On November 15, 2012, the Company announced a two -for-one split of
both NIKE Class A and Class B Common shares. The stock split was a 100
percent stock dividend payable on December 24, 2012 to shareholders of
record at the close of business on December 10, 2012. Common stock
began trading at the split-adjusted price on December 26, 2012. All share
numbers and per share amounts presented reflect the stock split.
Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal 2015
presentation.
Revisions
During the third quarter of fiscal 2015, management determined it had
incorrectly reflected unrealized gains and losses from re-measurement of
non-functional currency intercompany balances between certain of its foreign
wholly-owned subsidiaries in its Consolidated Statements of Cash Flows.
These unrealized gains and losses should have been classified as non-cash
reconciling items from Net income to Cash provided by operations,butwere
instead reported on the Effect of exchange rate changes on cash and
equivalents line of the Consolidated Statements of Cash Flows. This resulted
in an understatement of Cash provided by operations reported on the
Consolidated Statements of Cash Flows for certain prior periods; there was
no impact for any period to Net increase (decrease) in cash and equivalents
reported on the Consolidated Statements of Cash Flows, or Cash and
equivalents reported on the Consolidated Statements of Cash Flows and
Balance Sheets. The Company assessed the materiality of the
misclassifications on prior periods’ financial statements in accordance with
SEC Staff Accounting Bulletin (“SAB”) No. 99, Materiality, codified in
Accounting Standards Codification (“ASC”) 250, Presentation of Financial
Statements, and concluded that these misstatements were not material to
any prior annual or interim periods. Accordingly, in accordance with ASC 250
(SAB No. 108, Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements), the
amounts have been revised in the applicable Consolidated Statements of
Cash Flows. For the three and six months ended August 31, 2014 and
November 30, 2014 of fiscal 2015, the revisions increased Cash provided by
operations and decreased Effect of exchange rate changes on cash and
equivalents by $95 million and $312 million, respectively. For the fiscal years
ended May 31, 2014 and 2013, the revisions increased Cash provided by
operations and decreased Effect of exchange rate changes on cash and
equivalents by $10 million and $64 million, respectively. These amounts have
been reflected in the applicable tables below. As part of the revision to the
Consolidated Statements of Cash Flows, the Company has updated its
presentation to separately report Net foreign currency adjustments,which
was previously included within Amortization and other.
The following are selected line items from the Company’s Unaudited
Condensed Consolidated Statements of Cash Flows illustrating the effect of
these corrections:
NIKE, Inc. Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended August 31, 2014 Six Months Ended November 30, 2014
(In millions)
As
Reported Adjustment
As
Revised
As
Reported Adjustment
As
Revised
Cash provided by operations:
Net income $ 962 $ — $ 962 $ 1,617 $ — $ 1,617
Income charges (credits) not affecting cash:
Amortization and other (34) 42 8 (54) 69 15
Net foreign currency adjustments — 53 53 — 243 243
Cash provided by operations 588 95 683 1,235 312 1,547
Effect of exchange rate changes on cash and equivalents 97 (95) 2 288 (312) (24)
Net increase (decrease) in cash and equivalents 83 — 83 53 — 53
Cash and equivalents, beginning of period 2,220 — 2,220 2,220 — 2,220
CASH AND EQUIVALENTS, END OF PERIOD $ 2,303 $ — $ 2,303 $ 2,273 $ — $ 2,273
NIKE, INC. 2015 Annual Report and Notice of Annual Meeting 113
FORM 10-K