Question

Transition to IFRS (20-F) for Nike Inc.

- Determine the year in which the company transitioned to IFRS by referring to the accounting policies note in the financial statements (usually the first note). An overview of IFRS adoption should be mentioned. Based on that information, answer the following:

i. What was the first year the company adopted IFRS?

ii. What was the date of transition, as defined in IFRS 1?

iii. What was the previous GAAP that the company used before IFRS?

iiii. What exemptions did they utilize?

v. Were there any special IFRS considerations?

NIKE, Inc.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - Summary of Significant Accounting Policies:

Basis of presentation:

The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of the results of operations for the interim period. The year-end condensed consolidated balance sheet data as of May 31, 2009 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The interim financial information and notes thereto should be read in conjunction with the Company’s latest Annual Report on Form 10-K. The results of operations for the three months ended August 31, 2009 are not necessarily indicative of results to be expected for the entire year.

Subsequent events have been evaluated through October 8, 2009, the date of issuance of the Company’s Unaudited Condensed Consolidated Financial Statements.

Recently Adopted Accounting Standards:

Effective June 1, 2009, the Company adopted the following accounting standards:

In May 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 165, “Subsequent Events” (“FAS 165”), which establishes general standards of accounting and disclosure for events that occur after the balance sheet date but before financial statements are issued. The adoption of FAS 165 did not have an impact on the Company’s consolidated financial position or results of operations. See Note 1 “Basis of Presentation” for disclosure required under FAS 165.

In April 2009, the FASB issued three related FASB Staff Positions (“FSP”): (i) FSP Financial Accounting Standard (“FAS”) No. 115-2 and FAS No. 124-2, “Recognition of Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”) which provides new criteria for determining whether an impairment of a debt security is temporary and recorded in other comprehensive income in the equity section of the balance sheet or other-than-temporary and recorded as a loss on the statement of operations, (ii) FSP FAS No. 107-1 and Accounting Principles Board Opinion (“APB”) No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”) which requires disclosures about fair value of financial instruments in interim and annual reporting periods, and (iii) FSP FAS No. 157-4, “Determining the Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” which provides additional guidance for estimating fair value in accordance with SFAS No. 157, “Fair Value Measurements” (“FAS 157”). The adoption of these FSPs did not have an impact on the Company’s consolidated financial position or results of operations. See Note 5 - Fair Value Measurements for the disclosure required under FSP FAS 115-2 and FAS 124-2, and FSP FAS 107-1 and APB 28-1.

In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) 03-6-1 “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 clarifies that share-based payment awards that entitle their holders to receive nonforfeitable dividends before vesting should be considered participating securities and included in the computation of EPS pursuant to the two-class method. The adoption of FSP EITF 03-6-1 did not have a material impact on the Company’s consolidated financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“FAS 141(R)”) and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“FAS 160”). These standards aim to improve, simplify, and converge international standards of accounting for business combinations and the reporting of noncontrolling interests in consolidated financial statements. FAS 141(R) is effective for business combinations for which the acquisition date is on or after June 1, 2009. Generally, the effects of FAS 141(R) will depend on the Company’s future acquisitions. The adoption of FAS 160 did not have an impact on the Company’s consolidated financial position or results of operations.

In April 2008, the FASB issued Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS 142. The intent of the position is to improve the consistency between the useful life of a recognized intangible asset under FAS 142 and the period of expected cash flows used to measure the fair value of the asset under FAS 141(R), and other U.S. generally accepted accounting principles. The adoption of FSP FAS 142-3 did not have a material impact on the Company’s consolidated financial position or results of operations.

Answer 1

(i) 1 June 2009 is the first year of adoption of IFRS for Nike Inc. As is evident from the basis of preparation in the notes to financial statements.

(ii) Transition date for Nike Inc is 1 June 2008. Since comparative periods are required to be restated after adoption of IFRS first time.

(iii) Before adoption of IFRS, Nike Inc. was preparing financial statements in conformity with generally accepted accounting principles in United States of America.

(iv) Exemptions utilised by Nike Inc.

a) Exemption is obtained “Amendments to FASB Interpretation No. 46(R),” (“FAS 167”) which changes various aspects of accounting for and disclosures of interests in variable interest entities. Since this is effective from next financial year, hence the company has not taken applied this standard.

b) The codification of GAAP is not applied in these financial statements since will apply to the Company second quarter.

(v) Yes, there were various changes in accounting standards during the period which has been effectively applied by the Company. The new changes to standards includes disclosure about subsequent events, Accounting under fair value measurements, accounting under ESOP schemes, Business Combinations and Changes in determination of useful life of intangible asset. All these considerations were applied and disclosure has been given that these does not have material effect of financial statement of the Company.