Income Statement Nike's principal business activity involves the

Nike’s principal business activity involves the design, development, and worldwide marketing of high-quality footwear, apparel, equipment, and accessory products for serious and recreational athletes. Almost 25,000 employees work for the firm. Nike boasts the largest worldwide market share in the athletic-footwear industry and a leading market share in sports and athletic apparel.
This case uses Nike’s financial statements and excerpts from its notes to review important concepts underlying the three principal financial statements (balance sheet, income statement, and statement of cash flows) and relationships among them. The case also introduces tools for analyzing financial statements.
a. Identify the time at which Nike recognizes revenues. Does this timing of revenue recognition seem appropriate? Explain.
b. Identify the cost-flow assumption(s) that Nike uses to measure cost of goods sold. Does Nike’s choice of cost-flow assumption(s) seem appropriate? Explain.
c. Nike reports property, plant, and equipment on its balance sheet and discloses the amount of depreciation for each year in its statement of cash flows. Why doesn’t depreciation expense appear among its expenses on the income statement?
d. Identify the portion of Nike’s income tax expense of $469.8 million for 2009 that is currently payable to governmental entities and the portion that is deferred to future years. Why is the amount currently payable to governmental entities in 2009 greater than the income tax expense?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...


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