Nike

NIKE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 Ì Summary of SigniÑcant Accounting Policies: Basis of consolidation: The consolidated Ñnancial statements include the accounts of NIKE, Inc. and its subsidiaries (the Company). All signiÑcant intercompany transactions and balances have been eliminated. Recognition of revenues: Wholesale revenues are recognized when title passes and the risks and rewards of ownership have passed to the customer based on the terms of sale. Title passes generally upon shipment or upon receipt by the customer depending on the country of the sale and the agreement with the customer. Retail store revenues are recorded at the time of sale. Provisions for sales discounts and returns are made at the time of sale. Advertising and promotion: Advertising production costs are expensed the Ñrst time the advertisement is run. Media (TV and print) placement costs are expensed in the month the advertising appears. The majority of the Company's promotional expenses result from payments under endorsement contracts. Accounting for endorsement payments is based upon speciÑc contract provisions. Generally, endorsement payments are expensed uniformly over the term of the contract after giving recognition to periodic performance compliance provisions of the contracts. Prepayments made under contracts are included in prepaid expenses or other assets depending on the length of the contract. Total advertising and promotion expenses were $1,000.5 million, $978.2 million and $978.6 million for the years ended May 31, 2001, 2000 and 1999, respectively. Included in prepaid expenses and other assets was $122.3 million and $158.7 million at May 31, 2001 and 2000, respectively, relating to prepaid advertising and promotion expenses. Cash and equivalents: Cash and equivalents represent cash and short-term, highly liquid investments with original maturities of three months or less. Inventory valuation: Inventories are stated at the lower of cost or market....