Nike 2013 Annual Report Download - page 53

PART II
management believes is more likely than not to be realized. United States
income taxes are provided currently on financial statement earnings of non-
U.S. subsidiaries that are expected to be repatriated. The Company
determines annually the amount of undistributed non-U.S. earnings to invest
indefinitely in its non-U.S. operations.
The Company recognizes a tax benefit from uncertain tax positions in the
financial statements only when it is more likely than not that the position will be
sustained upon examination by relevant tax authorities. The Company
recognizes interest and penalties related to income tax matters in income tax
expense.
Refer to Note 9 — Income Taxes for further discussion.
Earnings Per Share
Basic earnings per common share is calculated by dividing net income by the
weighted average number of common shares outstanding during the year.
Diluted earnings per common share is calculated by adjusting weighted
average outstanding shares, assuming conversion of all potentially dilutive
stock options and awards.
RefertoNote12—EarningsPerShareforfurtherdiscussion.
Management Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates, including
estimates relating to assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Recently Adopted Accounting Standards
In July 2012, the FASB issued an accounting standards update intended to
simplify how an entity tests indefinite-lived intangible assets other than
goodwill for impairment by providing entities with an option to perform a
qualitative assessment to determine whether further impairment testing is
necessary. This accounting standard update will be effective for the Company
beginning June 1, 2013, and early adoption is permitted. The Company early
adopted this standard and the adoption did not have a material impact on its
consolidated financial position or results of operations.
In September 2011, the FASB issued updated guidance on the periodic
testing of goodwill for impairment. This guidance will allow companies to
assess qualitative factors to determine if it is more-likely-than-not that goodwill
might be impaired and whether it is necessary to perform the two-step
goodwill impairment test required under current accounting standards. This
new guidance was effective for the Company beginning June 1, 2012 and the
adoption did not have a material effect on its consolidated financial position or
results of operations.
In June 2011, the FASB issued guidance on the presentation of
comprehensive income. This new guidance eliminates the current option to
report other comprehensive income and its components in the statement of
shareholders’ equity. Companies are now required to present the
components of net income and other comprehensive income in either one
continuous statement, referred to as the statement of comprehensive
income, or in two separate, but consecutive statements. This requirement
was effective for the Company beginning June 1, 2012. As this guidance only
amended the presentation of the components of comprehensive income, the
adoption did not have an impact on the Company’s consolidated financial
position or results of operations. Further, this guidance required companies to
present reclassification adjustments out of accumulated other comprehensive
income by component in both the statement in which net income is
presented and the statement in which other comprehensive income is
presented. This requirement will be effective for the Company beginning
June 1, 2013. As this guidance only amends the presentation of the
components of comprehensive income, the Company does not anticipate the
adoption will have an impact on the Company’s consolidated financial
position or results of operations.
Recently Issued Accounting Standards
In December 2011, the FASB issued guidance enhancing disclosure
requirements surrounding the nature of an entity’s right to offset and related
arrangements associated with its financial instruments and derivative
instruments. This new guidance requires companies to disclose both gross
and net information about instruments and transactions eligible for offset in
the statement of financial position and instruments and transactions subject
to master netting arrangements. This new guidance is effective for the
Company beginning June 1, 2013. As this guidance only requires expanded
disclosures, the Company does not anticipate the adoption will have an
impact on its consolidated financial position or results of operations.
NOTE 2 — Inventories
Inventory balances of $3,434 million and $3,222 million at May 31, 2013 and 2012, respectively, were substantially all finished goods.
NOTE 3 — Property, Plant and Equipment
Property, plant and equipment included the following:
As of May 31,
(In millions) 2013 2012
Land $ 268 $ 252
Buildings 1,174 1,158
Machinery, equipment and internal-use software 2,985 2,654
Leasehold improvements 945 883
Construction in process 128 110
Total property, plant and equipment, gross 5,500 5,057
Less accumulated depreciation 3,048 2,848
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET $ 2,452 $ 2,209
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