Income Tax Accounting Policy
Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Analyst Adjustments: Removal of Deferred Taxes
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Adjusted Current Ratio
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

NIKE accounts for income taxes using the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. NIKE records a valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized.

NIKE recognizes a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not the position will be sustained upon examination by relevant tax authorities. NIKE recognizes interest and penalties related to income tax matters in Income tax expense.

Source: 10-K (filing date: 2019-07-23).

Nike Inc., income tax expense (benefit), continuing operations

US$ in millions

	12 months ended	May 31, 2019		May 31, 2018		May 31, 2017		May 31, 2016		May 31, 2015		May 31, 2014
	Federal
	State
	United States
	Foreign
	Current
	Federal
	State
	United States
	Foreign
	Deferred
	Income tax expense

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

Item	Description	The company
Current	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Nike Inc.’s current increased from 2017 to 2018 but then declined significantly from 2018 to 2019.
Deferred	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Nike Inc.’s deferred increased from 2017 to 2018 but then slightly declined from 2018 to 2019 not reaching 2017 level.
Income tax expense	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Nike Inc.’s income tax expense increased from 2017 to 2018 but then slightly declined from 2018 to 2019 not reaching 2017 level.

Nike Inc., effective income tax rate (EITR) reconciliation

		May 31, 2019	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014
	Federal income tax rate
	State taxes, net of federal benefit
	Foreign earnings
	Excess tax benefits from share-based compensation
	Resolution of a U.S. tax matter
	U.S. Research and Development tax credit
	Other, net
	Effective income tax rate, before the Tax Act
	Transition tax related to the Tax Act
	Remeasurement of deferred tax assets and liabilities related to the Tax Act
	Effective income tax rate

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

Item	Description	The company
Effective income tax rate, before the Tax Act	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Nike Inc.’s effective income tax rate, before the Tax Act declined from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Nike Inc., components of deferred tax assets and liabilities

US$ in millions

		May 31, 2019		May 31, 2018		May 31, 2017		May 31, 2016		May 31, 2015		May 31, 2014
	Inventories
	Sales return reserves
	Deferred compensation
	Stock-based compensation
	Reserves and accrued liabilities
	Net operating loss carry-forwards
	Foreign tax credit carry-forwards
	Undistributed earnings of foreign subsidiaries
	Other
	Deferred tax assets
	Valuation allowance
	Deferred tax assets after valuation allowance
	Foreign withholding tax on undistributed earnings of foreign subsidiaries
	Property, plant and equipment
	Intangibles
	Other
	Deferred tax liabilities
	Net deferred tax asset (liability)

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

Item	Description	The company
Deferred tax assets	Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Nike Inc.’s deferred tax assets declined from 2017 to 2018 but then slightly increased from 2018 to 2019.
Deferred tax assets after valuation allowance	Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards.	Nike Inc.’s deferred tax assets after valuation allowance declined from 2017 to 2018 but then slightly increased from 2018 to 2019.
Net deferred tax asset (liability)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Nike Inc.’s net deferred tax asset (liability) declined from 2017 to 2018 but then slightly increased from 2018 to 2019.

Nike Inc., adjustments to financial data

US$ in millions

		May 31, 2019	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014
	Adjustment to Current Assets
	Current assets (as reported)
	Less: Current deferred tax assets, net
	Current assets (adjusted)
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Current deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Shareholders’ Equity
	Shareholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Shareholders’ equity (adjusted)
	Adjustment to Net Income
	Net income (as reported)
	Add: Deferred income tax expense (benefit)
	Net income (adjusted)

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

Nike Inc., Financial Data: Reported vs. Adjusted

Nike Inc., adjusted ratios

		May 31, 2019	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014
	Current Ratio
	Reported current ratio
	Adjusted current ratio
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Nike Inc.’s adjusted current ratio deteriorated from 2017 to 2018 and from 2018 to 2019.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Nike Inc.’s adjusted net profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 not reaching 2017 level.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Nike Inc.’s adjusted total asset turnover improved from 2017 to 2018 and from 2018 to 2019.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Nike Inc.’s adjusted financial leverage increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Nike Inc.’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Nike Inc.’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

Nike Inc., Ratios: Reported vs. Adjusted

		May 31, 2019	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Current assets
	Current liabilities
	Ratio
	Current ratio¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted current assets
	Current liabilities
	Ratio
	Adjusted current ratio²

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

2019 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Nike Inc.’s adjusted current ratio deteriorated from 2017 to 2018 and from 2018 to 2019.

		May 31, 2019	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Revenues
	Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Revenues
	Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

2019 Calculations

¹ Net profit margin = 100 × Net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

² Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Nike Inc.’s adjusted net profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 not reaching 2017 level.

		May 31, 2019	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Revenues
	Total assets
	Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Revenues
	Adjusted total assets
	Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

2019 Calculations

¹ Total asset turnover = Revenues ÷ Total assets
= hidden ÷ hidden = hidden

² Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Nike Inc.’s adjusted total asset turnover improved from 2017 to 2018 and from 2018 to 2019.

		May 31, 2019	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Shareholders’ equity
	Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted shareholders’ equity
	Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

2019 Calculations

¹ Financial leverage = Total assets ÷ Shareholders’ equity
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Nike Inc.’s adjusted financial leverage increased from 2017 to 2018 and from 2018 to 2019.

		May 31, 2019	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Shareholders’ equity
	Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Adjusted shareholders’ equity
	Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

2019 Calculations

¹ ROE = 100 × Net income ÷ Shareholders’ equity
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Adjusted net income ÷ Adjusted shareholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Nike Inc.’s adjusted ROE deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

		May 31, 2019	May 31, 2018	May 31, 2017	May 31, 2016	May 31, 2015	May 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Total assets
	Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Adjusted total assets
	Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2019-07-23), 10-K (filing date: 2018-07-25), 10-K (filing date: 2017-07-20), 10-K (filing date: 2016-07-21), 10-K (filing date: 2015-07-23), 10-K (filing date: 2014-07-25).

2019 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Nike Inc.’s adjusted ROA deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level.

	Nike Inc.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

Nike Inc. (NKE)

Analysis of Income Taxes

Income Tax Accounting Policy

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Analyst Adjustments: Removal of Deferred Taxes

Nike Inc., Financial Data: Reported vs. Adjusted

Adjusted Ratios: Removal of Deferred Taxes (Summary)

Nike Inc., Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)