Courtney Roach
November 3, 2010

Changes and Error Footnote Analysis

According to Nike’s most recent 10K for fiscal year-ending (FYE) 2009, Note 1 addresses key accounting principles and states there have been no recent changes in valuation methods foreitherinventory or depreciation. Nike does however mention that there were necessary steps taken to streamline management. Also, GAAP requires Nike to make numerous estimates that may have actual amounts that differ.
According to Note 16, restructuring charges of $195 millionwere incurred to streamline management on Nike’s behalf. Additional costs are not expected to be incurred in future periods. Because this is an indirect cost of a change in accounting, the restructuring charge isincluded in corporate expense and pre-tax retained earningsin 2009 only, which is required under GAAP.Also, because this change was made by choice, the notes explain why, where, and when the change was made as well as the qualitative effects recorded. This meets all disclosure requirements by GAAP.
According to Note 4, Nike made revisions to preliminary estimates, including valuations of tangible and intangible assets. Nike meets GAAP disclosure requirements by presenting the effect on income and per-share amounts. Nike goes on to mention in Note 15 thatcurrently there are nocommitments, contingencies, or legal proceedings to be estimated that they believe could have a material impact on future financial statements or operations. This disclosure is not required but could be helpful to usersin letting them know risk is not a concern at this point in time regarding these three areas.
There have been numerous recently adoptedaccounting standards but majority are expected not to have a material impact on the consolidated financial statements. Nike however is still evaluating the impact of the provisions of the standard issued by FASB in June 2009 pertaining to VIEs which will be effective beginning June 2010. Becauseno material effects have been determined, no disclosure is required by GAAP.
Disclosures pertaining to changes and errors in accounting are helpful to all users. They are necessary in order to inform internal and external users of changes in values of accounts and provide an accurate representation of financial positions as well as providing information to help interpret what direction the Company is going in. In order to be useful, an accurate picture of financial statements is necessary. Lastly, providing users with explanations as to why changes are made lets them know that the entity’s best interest is in mind.