Revenue Recognition

Nike Inc. reports revenue recognition in the notes to the financial statements. For the latest 10-K filings with the securities exchange, revenue recognition is provided under Note 1, which relates to the summary of significant accounting policies considered in preparing the financial statements (SEC, 2024). Under the reporting, it is provided that the revenue recognized by the company arises from the sale of Nike Brand footwear, apparel and equipment, and Converse products: Revenue Recognition.

The revenue is explicitly stated in the company’s financial performance statement. Revenue is reported as a single line item, and when gauged after studying the chapter, revenue raised from sales is reported as required in the income statement. What stands out for me is the separation of income that arises from other activities other than sales. I take note that such revenues as tax refunds are not considered part of revenue, which leaves me with the following question:

• Should all incomes made by a business be included in the revenue reported, irrespective of whether they are raised from the normal course of business reported by the company?

Nike Inc. does not report any interesting or unusual revenue recognition practice as all reported items are properly contexed in the reporting requirements.

Adidas Inc. reports revenue recognition in the notes to the financial statements under “Summary of significant accounting policies” (Adidas, 2024). From the latest annual report, the company reports that revenue is derived from the sale of goods and is recognized once the goods are delivered to the customer. The revenue is recognized based on the price agreed upon and paid by the customer.

Essentially, this makes the single line item reported in the income statement, which aligns with what companies should be reporting, as provided by Wahlen et al. (2013). What stands out for me in the reporting is the fact that the company recognizes revenue in different ways under certain circumstances, such as installment payments by the customers or provisions of discounts. Notably, this prompts the following question for us to discuss:

• Should the company’s revenue recognition policy vary based on customer requirements?

Overall, Adidas does not report any unusual revenue recognition practices. It thoroughly explains how its revenue recognition procedures match the contemporary reporting requirements.

References

Adidas. (2024). Annual Report. https://report.adidas-group.com/2023/en

SEC. (2024). Nike Inc. 10-k forms.

https://www.sec.gov/Archives/edgar/data/320187/000032018724000044/nke-

20240531.htm

Wahlen, J. M., Jones, J. P., & Pagach, D. P. (2013). Intermediate accounting: Reporting and

Analysis. https://www.cengage.uk/c/intermediate-accounting-reporting-and-analysis-4e-

wahlen-jones-pagach/9780357905708/?filterBy=Higher-Education

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Companies: Nike and Adidas

Topic: Revenue recognition

1. Where in your companies’ most recent 10-K do they report items related to this topic? It may be included in the income statement, the balance sheet, or the notes. It may have its own line-item or it may be summarized into a broader category.
   After reading and studying the chapter, identify what the companies should be reporting and where it should be. Distinguish between required reporting and reporting that will only happen under specific circumstances.
2. Look for and read through your companies’ reporting on this topic. What stands out to you in their reporting? What elements of their reporting do you have questions about? List some of those questions here so we can address them in class.
3. Do your companies report any interesting or unusual revenue recognition practices or transactions? Explain
   

   Revenue Recognition