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Summary of Significant Accounting Policies | 9 Months Ended
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Feb. 28, 2015
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies |
NOTE 1 — Summary of Significant Accounting Policies
B asis of Presentation The accompanying Unaudited Condensed Consolidated Financial Statements reflect all normal adjustments which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end Condensed Consolidated Balance Sheet data as of May 31, 2014 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial information and notes thereto should be read in conjunction with the Company’s latest Annual Report on Form 10-K. The results of operations for the three and nine months ended February 28, 2015 are not necessarily indicative of results to be expected for the entire year. 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, but were 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 nine months ended February 28, 2014 of fiscal 2014, the revision increased Cash provided by operations and decreased Effect of exchange rate changes on cash and equivalents by $17 million. For the fiscal years ended May 31, 2014, 2013, and 2012, the revisions increased Cash provided by operations and decreased Effect of exchange rate changes on cash and equivalents by $10 million, $64 million and $108 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. Previously Disclosed Revisions As previously reported, the Company has historically capitalized costs associated with internally generated patents and trademarks and amortized these assets over the legal term of the patents and trademarks. During the fourth quarter of fiscal 2014, management determined that these capitalized costs were not accurately identified with specific patent or trademark assets and, therefore, concluded that amounts previously capitalized should have been expensed as incurred. Accordingly, the Unaudited Condensed Consolidated Financial Statements have been revised to correctly expense costs associated with internally developed patents and trademarks in the period incurred and to reverse expenses for amortization of previously capitalized costs. The revisions resulted in a decrease in Net income of $3 million and $7 million for the three and nine months ended February 28, 2014, respectively. Cash provided by operations decreased $15 million while Cash used by investing activities decreased $15 million for the nine months ended February 28, 2014. Also, in the fourth quarter of fiscal 2014, the Company revised certain prior year amounts in the Unaudited Condensed Consolidated Statements of Cash Flows to eliminate intercompany transfers of short-term investments, to correctly reflect the purchases, sales and maturities of short-term investments related to the Company's hedging program involving U.S. Dollar denominated available-for-sale securities and to correctly classify certain investment holdings as Short-term investments. For the nine months ended February 28, 2014, the revisions resulted in a net increase in Purchases of short-term investments of $89 million, a net decrease in Maturities of short-term investments of $145 million and a net increase in Sales of short-term investments of $234 million. This revision had no impact on Cash used by investing activities or Net increase (decrease) in cash and equivalents. The Company assessed the materiality of these misstatements on prior periods’ financial statements in accordance with SAB No. 99, Materiality, codified in ASC 250, Presentation of Financial Statements, and concluded that these misstatements were not material to any prior annual or interim periods. Accordingly, the Unaudited Condensed Consolidated Financial Statements as of February 28, 2014, and for the three and nine months then ended, which are presented herein, have been revised. The following are selected line items from the Company's Unaudited Condensed Consolidated Financial Statements illustrating the effect of these corrections and the correction of other immaterial errors: Third quarter of fiscal 2014 (presented herein for comparative purposes):
|  | NIKE, Inc. Unaudited Condensed Consolidated Statements of Income
|  | Three Months Ended February 28, 2014 |  | Nine Months Ended February 28, 2014
(In millions, except per share data) |  | As Reported |  | Adjustment |  | As Revised |  | As Reported |  | Adjustment |  | As Revised
Total selling and administrative expense |  | $ | 2,166 |  |  | $ | 3 |  |  | $ | 2,169 |  |  | $ | 6,310 |  |  | $ | 8 |  |  | $ | 6,318 |
Income before income taxes |  | 883 |  |  | (3 | ) |  | 880 |  |  | 2,640 |  |  | (8 | ) |  | 2,632 |
Income tax expense |  | 198 |  |  | — |  |  | 198 |  |  | 638 |  |  | (1 | ) |  | 637 |
NET INCOME |  | $ | 685 |  |  | $ | (3 | ) |  | $ | 682 |  |  | $ | 2,002 |  |  | $ | (7 | ) |  | $ | 1,995 |
Earnings per common share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.78 |  |  | $ | (0.01 | ) |  | $ | 0.77 |  |  | $ | 2.26 |  |  | $ | (0.01 | ) |  | $ | 2.25 |
Diluted |  | $ | 0.76 |  |  | $ | (0.01 | ) |  | $ | 0.75 |  |  | $ | 2.20 |  |  | $ | (0.01 | ) |  | $ | 2.19 |
|  | NIKE, Inc. Unaudited Condensed Consolidated Statements of Comprehensive Income
|  | Three Months Ended February 28, 2014 |  | Nine Months Ended February 28, 2014
(In millions) |  | As Reported |  | Adjustment |  | As Revised |  | As Reported |  | Adjustment |  | As Revised
Net income |  | $ | 685 |  |  | $ | (3 | ) |  | $ | 682 |  |  | $ | 2,002 |  |  | $ | (7 | ) |  | $ | 1,995 |
TOTAL COMPREHENSIVE INCOME |  | $ | 628 |  |  | $ | (3 | ) |  | $ | 625 |  |  | $ | 1,761 |  |  | $ | (7 | ) |  | $ | 1,754 |
|  | NIKE, Inc. Unaudited Condensed Consolidated Statements of Cash Flows
|  | Nine Months Ended February 28, 2014
(In millions) |  | As Reported |  | Adjustment |  | As Revised
Cash provided by operations: |  |  |  |  |  |
Net income |  | $ | 2,002 |  |  | $ | (7 | ) |  | $ | 1,995 |
Income charges (credits) not affecting cash: |  |  |  |  |  |
Amortization and other |  | 102 |  |  | (49 | ) |  | 53 |
Net foreign currency adjustments |  | — |  |  | 59 |  |  | 59 |
(Increase) in inventories |  | (343 | ) |  | (6 | ) |  | (349 | )
Increase (decrease) in accounts payable, accrued liabilities and income taxes |  | (54 | ) |  | 5 |  |  | (49 | )
Cash provided by operations |  | 1,683 |  |  | 2 |  |  | 1,685 |
Cash used by investing activities: |  |  |  |  |  |
Purchases of short-term investments |  | (4,146 | ) |  | (89 | ) |  | (4,235 | )
Maturities of short-term investments |  | 3,030 |  |  | (145 | ) |  | 2,885 |
Sales of short-term investments |  | 555 |  |  | 234 |  |  | 789 |
(Increase) in other assets, net of other liabilities |  | (16 | ) |  | 15 |  |  | (1 | )
Cash used by investing activities |  | (1,246 | ) |  | 15 |  |  | (1,231 | )
Effect of exchange rate changes on cash and equivalents |  | 7 |  |  | (17 | ) |  | (10 | )
Net increase (decrease) in cash and equivalents |  | (1,473 | ) |  | — |  |  | (1,473 | )
Cash and equivalents, beginning of period |  | 3,337 |  |  | — |  |  | 3,337 |
CASH AND EQUIVALENTS, END OF PERIOD |  | $ | 1,864 |  |  | $ | — |  |  | $ | 1,864 |
First and second quarters of fiscal 2015 (to be presented in Forms 10-Q for the first and second quarters of fiscal 2016 for comparative purposes):
|  | 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 |
The following are selected line items from the Company's Consolidated Financial Statements illustrating the effect of these corrections on the amounts previously reported in the Company's fiscal 2014 Annual Report on Form 10-K:
|  | NIKE, Inc. Consolidated Statements of Cash Flows
|  | Year Ended May 31, 2014 |  | Year Ended May 31, 2013 |  | Year Ended May 31, 2012
(In millions) |  | As Reported |  | Adjustment |  | As Revised |  | As Reported |  | Adjustment |  | As Revised |  | As Reported |  | Adjustment |  | As Revised
Cash provided by operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 2,693 |  |  | $ | — |  |  | $ | 2,693 |  |  | $ | 2,472 |  |  | $ | — |  |  | $ | 2,472 |  |  | $ | 2,211 |  |  | $ | — |  |  | $ | 2,211 |
Income charges (credits) not affecting cash: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortization and other |  | 114 |  |  | (46 | ) |  | 68 |  |  | 66 |  |  | (2 | ) |  | 64 |  |  | 23 |  |  | 45 |  |  | 68 |
Net foreign currency adjustments |  | — |  |  | 56 |  |  | 56 |  |  | — |  |  | 66 |  |  | 66 |  |  | — |  |  | 63 |  |  | 63 |
Cash provided by operations |  | 3,003 |  |  | 10 |  |  | 3,013 |  |  | 2,968 |  |  | 64 |  |  | 3,032 |  |  | 1,824 |  |  | 108 |  |  | 1,932 |
Effect of exchange rate changes on cash and equivalents |  | 1 |  |  | (10 | ) |  | (9 | ) |  | 100 |  |  | (64 | ) |  | 36 |  |  | 67 |  |  | (108 | ) |  | (41 | )
Net (decrease) increase in cash and equivalents |  | (1,117 | ) |  | — |  |  | (1,117 | ) |  | 1,083 |  |  | — |  |  | 1,083 |  |  | 377 |  |  | — |  |  | 377 |
Cash and equivalents, beginning of year |  | 3,337 |  |  | — |  |  | 3,337 |  |  | 2,254 |  |  | — |  |  | 2,254 |  |  | 1,877 |  |  | — |  |  | 1,877 |
CASH AND EQUIVALENTS, END OF YEAR |  | $ | 2,220 |  |  | $ | — |  |  | $ | 2,220 |  |  | $ | 3,337 |  |  | $ | — |  |  | $ | 3,337 |  |  | $ | 2,254 |  |  | $ | — |  |  | $ | 2,254 |
Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update that replaces existing revenue recognition guidance. Among other things, 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. The new guidance is effective for the Company beginning June 1, 2017 and early adoption is not permitted. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.

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