NOTE 1 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Unaudited Condensed Consolidated Financial Statements reflect all normal adjustments 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, 2014 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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 and six months ended November 30, 2014 are not necessarily indicative of results to be expected for the entire year.

Reclassifications

Certain prior year amounts have been reclassified to conform to fiscal 2015 presentation.

Revisions

The Company has historically capitalized costs associated with internally generated patents and trademarks and amortized these assets over the legal term of the patents and trademarks. During the fourth quarter of fiscal 2014, management determined that these capitalized costs were not accurately identified with specific patent or trademark assets and, therefore, concluded that amounts previously capitalized should have been expensed as incurred. Accordingly, the Unaudited Condensed Consolidated Financial Statements have been revised to correctly expense costs associated with internally developed patents and trademarks in the period incurred and to reverse expenses for amortization of previously capitalized costs. The revisions resulted in a decrease in Net income of $3 million and $4 million for the three and six months ended November 30, 2013, respectively. Cash provided by operations decreased $9 million while Cash used by investing activities decreased $9 million for the six months ended November 30, 2013.

Also, in the fourth quarter of fiscal 2014, the Company revised certain prior year amounts in the Unaudited Condensed Consolidated Statements of Cash Flows to eliminate intercompany transfers of short-term investments, to correctly reflect the purchases, sales and maturities of short-term investments related to the Company's hedging program involving U.S. Dollar denominated available-for-sale securities and to correctly classify certain investment holdings as Short-term investments. For the six months ended November 30, 2013, the revisions resulted in a net increase in Purchases of short-term investments of $89 million, a net increase in Maturities of short-term investments of $60 million and a net increase in Sales of short-term investments of $29 million. This revision had no impact on Cash used by investing activities or Net increase (decrease) in cash and equivalents.

Certain prior year amounts have also been revised in the Unaudited Condensed Consolidated Statements of Cash Flows to correctly recognize the cash flow impacts of certain inventory amounts held by third parties, which were identified during the third quarter of fiscal 2014 and resulted in cash flow impacts of $3 million for both Inventories and Accrued liabilities for the six months ended November 30, 2013. This revision had no impact on Cash provided by operations or Net increase (decrease) in cash and equivalents.

The Company also revised certain prior period amounts in the Unaudited Condensed Consolidated Statements of Cash Flows to correctly reflect non-cash additions to property, plant and equipment, which were identified during the second quarter of fiscal 2014. For the six months ended November 30, 2013, this revision increased Cash provided by operations and increased Cash used by investing activities, each by $21 million.

The Company assessed the materiality of these misstatements on prior periods’ financial statements in accordance with SEC Staff Accounting Bulletin ("SAB") No. 99, Materiality, codified in Accounting Standards Codification ("ASC") 250, Presentation of Financial Statements, and concluded that these misstatements were not material to any prior annual or interim periods. Accordingly, in accordance with ASC 250 (SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the Unaudited Condensed Consolidated Financial Statements as of November 30, 2013, and for the three and six months then ended, which are presented herein, have been revised. The following are selected line items from the Company's Unaudited Condensed Consolidated Financial Statements illustrating the effect of these corrections and the correction of other immaterial errors:



	NIKE, Inc. Unaudited Condensed Consolidated Statements of Income
	Three Months Ended November 30, 2013							Six Months Ended November 30, 2013
(In millions, except per share data)	As Reported		Adjustment			As Revised		As Reported		Adjustment			As Revised
Total selling and administrative expense	$	2,088	$	3		$	2,091	$	4,144	$	5		$	4,149
Income before income taxes	717		(3		)	714		1,757		(5		)	1,752
Income tax expense	180		—			180		440		(1		)	439
NET INCOME	$	537	$	(3	)	$	534	$	1,317	$	(4	)	$	1,313

Earnings per common share:
Basic	$	0.60	$	—		$	0.60	$	1.48	$	—		$	1.48
Diluted	$	0.59	$	—		$	0.59	$	1.45	$	(0.01	)	$	1.44



	NIKE, Inc. Unaudited Condensed Consolidated Statements of Comprehensive Income
	Three Months Ended November 30, 2013							Six Months Ended November 30, 2013
(In millions)	As Reported		Adjustment			As Revised		As Reported		Adjustment			As Revised
Net income	$	537	$	(3	)	$	534	$	1,317	$	(4	)	$	1,313
TOTAL COMPREHENSIVE INCOME	$	450	$	(3	)	$	447	$	1,133	$	(4	)	$	1,129



	NIKE, Inc. Unaudited Condensed Consolidated Statements of Cash Flows
	Six Months Ended November 30, 2013
(In millions)	As Reported			Adjustment			As Revised
Cash provided by operations:
Net income	$	1,317		$	(4	)	$	1,313
Income charges (credits) not affecting cash:
Deferred income taxes	23			1			24
Amortization and other	54			(3		)	51
(Increase) in inventories	(280		)	3			(277		)
(Decrease) in accounts payable, accrued liabilities and income taxes	(305		)	22			(283		)
Cash provided by operations	929			19			948
Cash used by investing activities:
Purchases of short-term investments	(2,759		)	(89		)	(2,848		)
Maturities of short-term investments	1,602			60			1,662
Sales of short-term investments	517			29			546
Additions to property, plant and equipment	(428		)	(21		)	(449		)
(Increase) in other assets, net of other liabilities	(10		)	9			(1		)
Cash used by investing activities	(1,177		)	(12		)	(1,189		)
Cash used by financing activities:
(Decrease) increase in notes payable	66			(7		)	59
Cash used by financing activities	(990		)	(7		)	(997		)
Net increase (decrease) in cash and equivalents	(1,251		)	—			(1,251		)
Cash and equivalents, beginning of period	3,337			—			3,337
CASH AND EQUIVALENTS, END OF PERIOD	$	2,086		$	—		$	2,086

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update that replaces existing revenue recognition guidance. Among other things, the updated guidance requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance is effective for the Company beginning June 1, 2017 and early adoption is not permitted. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.