Question

Historically, Nike presented its Income Statement using the single step presentation approach. Eventually, Nike came under tremendous pressure to change the presentation of its Income Statement to the multiple step approach, which it did. What do you think caused Nike to come under such pressure to change its Income Statement to the multiple step approach? Please be specific in your answer (hint: think or consider some of the fundamental principles of accounting information……).

Answer 1

Before getting into the consideration of what happened to Nike Inc. we should know in brief what is the difference between Single Step Presentation and Multiple Step Approach. Single Step presentation is the basic and doesn't give any brief information about any of the incomes, expenses, investments, etc. It directly shows the amount and nothing else. No information about the Gross Receipts, Net Profits before tax or after tax is provided seperately but given directly. If we talk about the multiple step approach then in this brief information about everything is given such as Gross Receipts, Net Profits, etc. detailed information is provided with them. Operating profit is disclosed properly and no information is hidden in anything. The compayn's major area of investments, revenues, expenses, etc. are disclosed properly which makes it easier for the stakeholders to look after the company's financials in a easier and better way. The basic pressure on Nike was this ony, in the end if the company is taking money from its shareholders or asking the stakeholders to invest then it has to be accountable to the people. People should know from how much investment what is their basic earnings from the business which is very important for every investor to know because at the end transparency is what matters. Becasue if their is no transparency in the company then the stakeholders will also think before investing in the company that whether they should invest in or not because the picture of the company is not clear to the stakeholders. Transparency and accountability is very important if we want the stakeholders to take interest in the company.