Segment Reporting - Financial Reporting and Analysis

A public business enterprise reports financial and descriptive information about reportable operating segments. Operating segments are segments about which separate financial information is available that is evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. It requires information about the countries in which the firm earns revenues and holds assets, and about major customers.

Descriptive information must be disclosed about the way the operating segments were determined. Disclosure is required for products and services by the operating segments. Disclosure is also required about the differences between the measurements used in reporting segment information and those used in the firms general-purpose financial information.

Segment data can be analyzed both in terms of trends and ratios. Vertical and horizontal common-size analyzes can be used for trends. Examples of ratios would be relating profits to sales or identifiable assets.

Segment trends would be of interest to management and investors. The maximum benefits from this type of analysis come when analyzing a nonintegrated company in terms of product lines, especially with segments of relatively similar size.

Nike reported operating segments and related information in Note 16. Note 16 ispartially included in Exhibit. This data should be reviewed, and consideration should be given to using vertical and horizontal analyzes and to computing ratios that appear meaningful.

This type of review is illustrated in Exhibits presents some Nike segment information in vertical common-size analysis. Net revenue, contribution profit, capital expenditures, and depreciation are included.

Nike, Inc.

Segment Information

Nike, Inc.

Segment Information common size Analysis

Based on this analysis, the United States is the dominant segment, followed by Europe. The proportion of revenue coming from the United States has declined, while the proportion of revenue coming from Europe has increased. Contribution profitcoming from the United States has fluctuated substantially. Contribution profit from Europe increased substantially.

A review of Exhibit (segment information - ratio analysis), indicates that contribution profit to net revenue declined substantially in the United States. But the UnitedStates still has the highest contribution profit to net revenue. The contribution profit to net revenue declined for Europe in 1998, but rebounded well in 1999.

Nike, Inc.

Segment Information ratio  Analysis


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