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Intermediate Financial Accounting - 10K Nike form

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Review the Form 10-K for Nike, Inc. as of December 31, 2007 in the Doc Sharing Area. This week your major task will include analyzing the income statement and revenue recognition policies.

-What type of format is used to represent the income statement?

-What items on the income statement are estimated? Do you agree with allowing the account(s) identified to be estimated? Why or why not?

-What are the primary revenue sources of Nike, Inc.?

-What is the gross margin as a percentage of sales for the year ending 2007? Has this improved when compared to 2006?

-What geographical area has the highest amount of net revenues? Is this what you would expect? Why?

-What is the revenue recognition policy of Nike, Inc.?

-Which major customers has Nike, Inc. included in its revenues and what percent?

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-What type of format is used to represent the income statement?

Nike consistently uses a multi-step format to represent the income statement and all places where Nike has included a statement of operations and related sales data. We see this in several places and it is evidenced in each place where 1) Nike breaks down their revenue and cost of goods sold to show their profit margin, and 2) each place where Nike breaks down their segment lines, both by region and by line to show the actual numbers instead of one total. We see a separation for apparel, shoes, and equipment in each region.
As for the income statement itself, the multi step model carries through, as we can see on pg. 51. The gross margin is specifically calculated in the multi step format.

-What items on the income statement are estimated? Do you agree with allowing the account(s) identified to be estimated? Why or why not?

The majority of their estimates are balance sheet accounts. The income statement accounts affected would be revenues. Nike ...

Solution Summary

-What type of format is used to represent the income statement?

-What items on the income statement are estimated? Do you agree with allowing the account(s) identified to be estimated? Why or why not?

-What are the primary revenue sources of Nike, Inc.?

-What is the gross margin as a percentage of sales for the year ending 2007? Has this improved when compared to 2006?

-What geographical area has the highest amount of net revenues? Is this what you would expect? Why?

-What is the revenue recognition policy of Nike, Inc.?

-Which major customers has Nike, Inc. included in its revenues and what percent?

$2.19
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Nike 10K Form Analysis - Intermediate Financial Accounting I

-What items on the balance sheet would be recognized at historical cost?

-Which of the items listed using historical cost could potentially be the most undervalued? Would any of the items possibly be overvalued under historical cost?

-Do the notes to the financial statements disclose fair market values on these items identified? Why? Justify your answer.

-What is the amount of total assets on the balance sheet? Did this balance seem high, low, or just about right to you? Why?

-What is the amount of total current liabilities on the balance sheet? What determines if an item is listed as current?

-Do you feel that the notes to the financial statements are adequate in regard to disclosing areas that need further clarification? Why?

-Does Nike, Inc. address inventory reserves? If so what is their policy related to this? Do you agree with this? Why?

-Does Nike, Inc. use the retail inventory method and if so, what version do they use? If not why?

-What is included in property, plant, and equipment? Are there any special rules related to valuation of this group of assets?

-Which asset under property, plant, and equipment makes up the largest portion of the balance? Which asset makes up the smallest portion of the balance?

-Do you think that there should be more detail on the face of the balance sheet on the property, plant, and equipment account such as showing the different asset accounts? What would be the value of doing this?

-Are there any gains or losses included in the income statement balance? If so what are the details? If not why do you think they are not included?

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