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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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?
Solution Preview
-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 ...
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