NIKE INC, 10-K filed on 7/21/2016
Annual Report
Document and Entity Information (USD $)
12 Months Ended
May 31, 2016
Nov. 30, 2015
Jul. 15, 2016
Class A Convertible Common Stock
Nov. 30, 2015
Class A Convertible Common Stock
Jul. 15, 2016
Class B Common Stock
Nov. 30, 2015
Class B Common Stock
Document Information [Line Items]
 
 
 
 
 
 
Document Type
10-K 
 
 
 
 
 
Amendment Flag
false 
 
 
 
 
 
Document Period End Date
May 31, 2016 
 
 
 
 
 
Document Fiscal Year Focus
2016 
 
 
 
 
 
Document Fiscal Period Focus
FY 
 
 
 
 
 
Trading Symbol
NKE 
 
 
 
 
 
Entity Registrant Name
NIKE INC 
 
 
 
 
 
Entity Central Index Key
0000320187 
 
 
 
 
 
Current Fiscal Year End Date
--05-31 
 
 
 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
 
 
 
Entity Current Reporting Status
Yes 
 
 
 
 
 
Entity Voluntary Filers
No 
 
 
 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
 
 
 
Entity Public Float (In Dollars)
 
$ 93,468,629,731 
 
$ 4,075,394,149 
 
$ 89,393,235,582 
Entity Common Stock Shares Outstanding (In Shares)
 
 
329,251,752 
 
1,348,366,883 
 
Consolidated Statements Of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Income Statement [Abstract]
 
 
 
Revenues
$ 32,376 
$ 30,601 
$ 27,799 
Cost of sales
17,405 
16,534 
15,353 
Gross profit
14,971 
14,067 
12,446 
Demand creation expense
3,278 
3,213 
3,031 
Operating overhead expense
7,191 
6,679 
5,735 
Total selling and administrative expense
10,469 
9,892 
8,766 
Interest expense (income), net
19 
28 
33 
Other (income) expense, net
(140)
(58)
103 
Income before income taxes
4,623 
4,205 
3,544 
Income tax expense
863 
932 
851 
NET INCOME
$ 3,760 
$ 3,273 
$ 2,693 
Earnings per common share:
 
 
 
Basic (in dollars per share)
$ 2.21 
$ 1.90 
$ 1.52 
Diluted (in dollars per share)
$ 2.16 
$ 1.85 
$ 1.49 
Dividends declared per common share (in dollars per share)
$ 0.62 
$ 0.54 
$ 0.47 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Statement of Comprehensive Income [Abstract]
 
 
 
Net income
$ 3,760 
$ 3,273 
$ 2,693 
Other comprehensive income (loss), net of tax:
 
 
 
Change in net foreign currency translation adjustment
(176)1
(20)1
(32)1
Change in net gains (losses) on cash flow hedges
(757)2
1,188 2
(161)2
Change in net gains (losses) on other
5 1
(7)1
4 1
Total other comprehensive income (loss), net of tax
(928)
1,161 
(189)
TOTAL COMPREHENSIVE INCOME
$ 2,832 
$ 4,434 
$ 2,504 
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Statement of Comprehensive Income [Abstract]
 
 
 
Foreign currency translation and other, tax benefit (expense)
$ 0 
$ 0 
$ 0 
Net gain (loss) on cash flow hedges, tax benefit (expense)
35 
(31)
18 
Net gain (loss) on other, tax benefit (expense)
$ 0 
$ 0 
$ 0 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Current assets:
 
 
Cash and equivalents
$ 3,138 
$ 3,852 
Short-term investments
2,319 
2,072 
Accounts receivable, net
3,241 
3,358 
Inventories
4,838 
4,337 
Prepaid expenses and other current assets
1,489 
1,968 
Total current assets
15,025 
15,587 
Property, plant and equipment, net
3,520 
3,011 
Identifiable intangible assets, net
281 
281 
Goodwill
131 
131 
Deferred income taxes and other assets
2,439 
2,587 
TOTAL ASSETS
21,396 
21,597 
Current liabilities:
 
 
Current portion of long-term debt
44 
107 
Notes payable
1 
74 
Accounts payable
2,191 
2,131 
Accrued liabilities
3,037 
3,949 
Income taxes payable
85 
71 
Total current liabilities
5,358 
6,332 
Long-term debt
2,010 
1,079 
Deferred income taxes and other liabilities
1,770 
1,479 
Commitments and contingencies
   
   
Redeemable preferred stock
0 
0 
Shareholders’ equity:
 
 
Capital in excess of stated value
7,786 
6,773 
Accumulated other comprehensive income
318 
1,246 
Retained earnings
4,151 
4,685 
Total shareholders’ equity
12,258 
12,707 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
21,396 
21,597 
Class A Convertible Common Stock
 
 
Shareholders’ equity:
 
 
Common stock
0 
0 
Class B Common Stock
 
 
Shareholders’ equity:
 
 
Common stock
$ 3 
$ 3 
Consolidated Balance Sheets (Parenthetical)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Class A Convertible Common Stock
 
 
Common Stock, shares outstanding
353 
355 
Class B Common Stock
 
 
Common Stock, shares outstanding
1,329 
1,357 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Cash provided by operations:
 
 
 
Net income
$ 3,760 
$ 3,273 
$ 2,693 
Income charges (credits) not affecting cash:
 
 
 
Depreciation
649 
606 
518 
Deferred income taxes
(80)
(113)
(11)
Stock-based compensation
236 
191 
177 
Amortization and other
13 
43 
68 
Net foreign currency adjustments
98 
424 
56 
Changes in certain working capital components and other assets and liabilities:
 
 
 
Decrease (increase) in accounts receivable
60 
(216)
(298)
(Increase) in inventories
(590)
(621)
(505)
(Increase) in prepaid expenses and other current assets
(161)
(144)
(210)
(Decrease) increase in accounts payable, accrued liabilities and income taxes payable
(889)
1,237 
525 
Cash provided by operations
3,096 
4,680 
3,013 
Cash used by investing activities:
 
 
 
Purchases of short-term investments
(5,367)
(4,936)
(5,386)
Maturities of short-term investments
2,924 
3,655 
3,932 
Sales of short-term investments
2,386 
2,216 
1,126 
Investments in reverse repurchase agreements
150 
(150)
0 
Additions to property, plant and equipment
(1,143)
(963)
(880)
Disposals of property, plant and equipment
10 
3 
3 
Decrease (increase) in other assets, net of other liabilities
6 
0 
(2)
Cash used by investing activities
(1,034)
(175)
(1,207)
Cash used by financing activities:
 
 
 
Net proceeds from long-term debt issuance
981 
0 
0 
Long-term debt payments, including current portion
(106)
(7)
(60)
(Decrease) increase in notes payable
(67)
(63)
75 
Payments on capital lease obligations
(7)
(19)
(17)
Proceeds from exercise of stock options and other stock issuances
507 
514 
383 
Excess tax benefits from share-based payment arrangements
281 
218 
132 
Repurchase of common stock
(3,238)
(2,534)
(2,628)
Dividends — common and preferred
(1,022)
(899)
(799)
Cash used by financing activities
(2,671)
(2,790)
(2,914)
Effect of exchange rate changes on cash and equivalents
(105)
(83)
(9)
Net (decrease) increase in cash and equivalents
(714)
1,632 
(1,117)
Cash and equivalents, beginning of year
3,852 
2,220 
3,337 
CASH AND EQUIVALENTS, END OF YEAR
3,138 
3,852 
2,220 
Cash paid during the year for:
 
 
 
Interest, net of capitalized interest
70 
53 
53 
Income taxes
748 
1,262 
856 
Non-cash additions to property, plant and equipment
252 
206 
167 
Dividends declared and not paid
$ 271 
$ 240 
$ 209 
Consolidated Statements of Shareholders' Equity (USD $)
In Millions, unless otherwise specified
Total
USD ($)
Capital in Excess of Stated Value
USD ($)
Accumulated Other Comprehensive Income
USD ($)
Retained Earnings
USD ($)
Class A Common Stock
Class A Common Stock
Common Stock
USD ($)
Class B Common Stock
Class B Common Stock
Common Stock
USD ($)
Beginning Balance at May. 31, 2013
$ 11,081 
$ 5,184 
$ 274 
$ 5,620 
 
$ 0 
 
$ 3 
Beginning Balance (in shares) at May. 31, 2013
 
 
 
 
 
356 
 
1,433 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Stock options exercised (in shares)
 
 
 
 
 
 
 
22.0 
Stock options exercised
445 
445 
 
 
 
 
 
 
Conversion to Class B Common Stock (in shares)
 
 
 
 
 
(1)
 
1 
Conversion to Class B Common Stock
0 
 
 
 
 
 
 
 
Repurchase of Class B Common Stock (in shares)
 
 
 
 
 
 
 
(73)
Repurchase of Class B Common Stock
(2,628)
(11)
 
(2,617)
 
 
 
 
Dividends on Common stock
(821)
 
 
(821)
 
 
 
 
Issuance of shares to employees (in shares)
 
 
 
 
 
 
 
3 
Issuance of shares to employees
78 
78 
 
 
 
 
 
 
Stock-based compensation
177 
177 
 
 
 
 
 
 
Forfeiture of shares from employees (in shares)
 
 
 
 
 
 
 
(1)
Forfeiture of shares from employees
(12)
(8)
 
(4)
 
 
 
 
Net income
2,693 
 
 
2,693 
 
 
 
 
Other comprehensive income (loss)
(189)
 
(189)
 
 
 
 
 
Ending Balance at May. 31, 2014
10,824 
5,865 
85 
4,871 
 
0 
 
3 
Ending Balance (in shares) at May. 31, 2014
 
 
 
 
 
355 
 
1,385 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Stock options exercised (in shares)
 
 
 
 
 
 
 
27.0 
Stock options exercised
639 
639 
 
 
 
 
 
 
Repurchase of Class B Common Stock (in shares)
 
 
 
 
 
 
 
(58)
Repurchase of Class B Common Stock
(2,534)
(9)
 
(2,525)
 
 
 
 
Dividends on Common stock
(931)
 
 
(931)
 
 
 
 
Issuance of shares to employees (in shares)
 
 
 
 
 
 
 
3 
Issuance of shares to employees
92 
92 
 
 
 
 
 
 
Stock-based compensation
191 
191 
 
 
 
 
 
 
Forfeiture of shares from employees (in shares)
 
 
 
 
 
 
 
0 
Forfeiture of shares from employees
(8)
(5)
 
(3)
 
 
 
 
Net income
3,273 
 
 
3,273 
 
 
 
 
Other comprehensive income (loss)
1,161 
 
1,161 
 
 
 
 
 
Ending Balance at May. 31, 2015
12,707 
6,773 
1,246 
4,685 
 
0 
 
3 
Ending Balance (in shares) at May. 31, 2015
 
 
 
 
355 
355 
1,357 
1,357 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Stock options exercised (in shares)
 
 
 
 
 
 
 
22.0 
Stock options exercised
680 
680 
 
 
 
 
 
 
Conversion to Class B Common Stock (in shares)
 
 
 
 
 
(2)
 
2 
Conversion to Class B Common Stock
0 
 
 
 
 
 
 
 
Repurchase of Class B Common Stock (in shares)
 
 
 
 
 
 
 
(55)
Repurchase of Class B Common Stock
(3,238)
(8)
 
(3,230)
 
 
 
 
Dividends on Common stock
(1,053)
 
 
(1,053)
 
 
 
 
Issuance of shares to employees (in shares)
 
 
 
 
 
 
 
3 
Issuance of shares to employees
115 
115 
 
 
 
 
 
 
Stock-based compensation
236 
236 
 
 
 
 
 
 
Forfeiture of shares from employees (in shares)
 
 
 
 
 
 
 
0 
Forfeiture of shares from employees
(21)
(10)
 
(11)
 
 
 
 
Net income
3,760 
 
 
3,760 
 
 
 
 
Other comprehensive income (loss)
(928)
 
(928)
 
 
 
 
 
Ending Balance at May. 31, 2016
$ 12,258 
$ 7,786 
$ 318 
$ 4,151 
 
$ 0 
 
$ 3 
Ending Balance (in shares) at May. 31, 2016
 
 
 
 
353 
353 
1,329 
1,329 
Consolidated Statements of Shareholders' Equity (Parenthetical)
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Statement of Stockholders' Equity [Abstract]
 
 
 
Dividends declared per common share (in dollars per share)
$ 0.62 
$ 0.54 
$ 0.47 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
NOTE 1 — Summary of Significant Accounting Policies
 
Description of Business
NIKE, Inc. is a worldwide leader in the design, development and worldwide marketing and selling of athletic footwear, apparel, equipment, accessories and services. NIKE, Inc. portfolio brands include the NIKE Brand, Jordan Brand, Hurley and Converse. The NIKE Brand is focused on performance athletic footwear, apparel, equipment, accessories and services across a wide range of sport categories, amplified with sport-inspired sportswear products carrying the Swoosh trademark as well as other NIKE Brand trademarks. The Jordan Brand is focused on athletic and casual footwear, apparel and accessories, using the Jumpman trademark. Sales of Jordan Brand products are reported as a separate category within the respective NIKE Brand geographic operating segments. The Hurley brand is focused on surf and action sports and youth lifestyle footwear, apparel and accessories, using the Hurley trademark. Sales of Hurley brand products are included within the NIKE Brand Action Sports category and within the NIKE Brand's North America geographic operating segment, respectively. Converse designs, distributes, markets and sells casual sneakers, apparel and accessories under the Converse, Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell trademarks. In some markets outside the U.S., these trademarks are licensed to third parties who design, distribute, market and sell similar products. Operating results of the Converse brand are reported on a stand-alone basis.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the “Company”). All significant intercompany transactions and balances have been eliminated.
On November 19, 2015, the Company announced a two-for-one split of both NIKE Class A and Class B Common Stock. The stock split was in the form of a 100 percent stock dividend payable on December 23, 2015 to shareholders of record at the close of business on December 9, 2015. Common stock began trading at the split-adjusted price on December 24, 2015. All share and per share amounts presented reflect the stock split.
Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal 2016 presentation.
Revenue Recognition
Wholesale revenues are recognized when title and the risks and rewards of ownership have passed to the customer, based on the terms of sale. This occurs 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 and online store revenues are recorded upon delivery to the customer. Provisions for post-invoice sales discounts, returns and miscellaneous claims from customers are estimated and recorded as a reduction to revenue at the time of sale. Post-invoice sales discounts consist of contractual programs with certain customers or discretionary discounts that are expected to be granted to certain customers at a later date. Estimates of discretionary discounts, returns and claims are based on (1) historical rates, (2) specific identification of outstanding claims and outstanding returns not yet received from customers and (3) estimated discounts, returns and claims expected, but not yet finalized with customers. As of May 31, 2016 and 2015, the Company’s reserve balances for post-invoice sales discounts, returns and miscellaneous claims were $789 million and $724 million, respectively.
Cost of Sales
Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), third-party royalties, certain foreign currency hedge gains and losses and research, design and development costs. Outbound shipping and handling costs are expensed as incurred and included in Cost of sales.
Operating Overhead Expense
Operating overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services and meetings and travel.
Demand Creation Expense
Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, television, digital and print advertising, brand events and retail brand presentation. Advertising production costs are expensed the first time an advertisement is run. Advertising communication costs are expensed when the advertisement appears. Costs related to brand events are expensed when the event occurs. Costs related to retail brand presentation are expensed when the presentation is completed and delivered.
A significant amount of the Company’s promotional expenses result from payments under endorsement contracts. Accounting for endorsement payments is based upon specific contract provisions. Generally, endorsement payments are expensed on a straight-line basis 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 and other current assets or Deferred income taxes and other assets depending on the period to which the prepayment applies.
Certain contracts provide for contingent payments to endorsers based upon specific achievements in their sports (e.g., winning a championship). The Company records demand creation expense for these amounts when the endorser achieves the specific goal.
Certain contracts provide for variable payments based upon endorsers maintaining a level of performance in their sport over an extended period of time (e.g., maintaining a specified ranking in a sport for a year). When the Company determines payments are probable, the amounts are reported in Demand creation expense ratably over the contract period based on our best estimate of the endorser's performance. In these instances, to the extent that actual payments to the endorser differ from the Company's estimate due to changes in the endorser’s performance, increased or decreased demand creation expense may be recorded in a future period.
Certain contracts provide for royalty payments to endorsers based upon a predetermined percent of sales of particular products. The Company expenses these payments in Cost of sales as the related sales occur. In certain contracts, the Company offers minimum guaranteed royalty payments. For contracts for which the Company estimates it will not meet the minimum guaranteed amount of royalty fees through sales of product, the Company records the amount of the guaranteed payment in excess of that earned through sales of product in Demand creation expense uniformly over the contract term.
Through cooperative advertising programs, the Company reimburses retail customers for certain costs of advertising the Company’s products. The Company records these costs in Demand creation expense at the point in time when it is obligated to its customers for the costs. This obligation may arise prior to the related advertisement being run.
Total advertising and promotion expenses were $3,278 million, $3,213 million and $3,031 million for the years ended May 31, 2016, 2015 and 2014, respectively. Prepaid advertising and promotion expenses totaled $540 million and $455 million at May 31, 2016 and 2015, respectively, and were recorded in Prepaid expenses and other current assets and Deferred income taxes and other assets depending on the period to which the prepayment applies.
Cash and Equivalents
Cash and equivalents represent cash and short-term, highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, money market funds, time deposits and corporate debt securities with maturities of 90 days or less at the date of purchase.
Short-Term Investments
Short-term investments consist of highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, time deposits and corporate debt securities, with maturities over 90 days at the date of purchase. Debt securities that the Company has the ability and positive intent to hold to maturity are carried at amortized cost. At May 31, 2016 and 2015, the Company did not hold any short-term investments that were classified as trading or held-to-maturity.
At May 31, 2016 and 2015, Short-term investments consisted of available-for-sale securities. Available-for-sale securities are recorded at fair value with unrealized gains and losses reported, net of tax, in Accumulated other comprehensive income, unless unrealized losses are determined to be other than temporary. Realized gains and losses on the sale of securities are determined by specific identification. The Company considers all available-for-sale securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and therefore classifies all securities with maturity dates beyond 90 days at the date of purchase as current assets within Short-term investments on the Consolidated Balance Sheets.
Refer to Note 6 — Fair Value Measurements for more information on the Company’s short-term investments.
Allowance for Uncollectible Accounts Receivable
Accounts receivable, net consist primarily of amounts receivable from customers. The Company makes ongoing estimates relating to the collectability of its accounts receivable and maintains an allowance for estimated losses resulting from the inability of its customers to make required payments. In determining the amount of the allowance, the Company considers historical levels of credit losses and makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Accounts receivable with anticipated collection dates greater than 12 months from the balance sheet date and related allowances are considered non-current and recorded in Deferred income taxes and other assets. The allowance for uncollectible accounts receivable was $43 million and $78 million at May 31, 2016 and 2015, respectively, of which $17 million and $24 million, respectively, was classified as long-term and recorded in Deferred income taxes and other assets.
Inventory Valuation
Inventories are stated at lower of cost or market and valued on either an average or specific identification cost basis. For inventories in transit that represent direct shipments to customers, the related inventory and cost of sales are recognized on a specific identification basis. Inventory costs primarily consist of product cost from the Company's suppliers, as well as inbound freight, import duties, taxes, insurance and logistics and other handling fees.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and leasehold improvements over 2 to 40 years and for machinery and equipment over 2 to 15 years.
Depreciation and amortization of assets used in manufacturing, warehousing and product distribution are recorded in Cost of sales. Depreciation and amortization of other assets are recorded in Operating overhead expense.
Software Development Costs
Internal Use Software: Expenditures for major software purchases and software developed for internal use are capitalized and amortized over a 2 to 10 year period on a straight-line basis. The Company’s policy provides for the capitalization of external direct costs of materials and services associated with developing or obtaining internal use computer software. In addition, the Company also capitalizes certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects. The amount of capitalizable payroll costs with respect to these employees is limited to the time directly spent on such projects. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred.
Computer Software to be Sold, Leased or Otherwise Marketed: Development costs of computer software to be sold, leased or otherwise marketed as an integral part of a product are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Therefore, software development costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally most software development costs have been expensed as incurred.
Impairment of Long-Lived Assets
The Company reviews the carrying value of long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group’s carrying amount and its estimated fair value.
Goodwill and Indefinite-Lived Intangible Assets
The Company performs annual impairment tests on goodwill and intangible assets with indefinite lives in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit or an intangible asset with an indefinite life below its carrying value. Events or changes in circumstances that may trigger interim impairment reviews include significant changes in business climate, operating results, planned investments in the reporting unit, planned divestitures or an expectation that the carrying amount may not be recoverable, among other factors. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the two-step impairment test is unnecessary. The two-step impairment test first requires the Company to estimate the fair value of its reporting units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and the Company proceeds to step two of the impairment analysis. In step two of the analysis, the Company measures and records an impairment loss equal to the excess of the carrying value of the reporting unit's goodwill over its implied fair value, if any.
The Company generally bases its measurement of the fair value of a reporting unit on a blended analysis of the present value of future discounted cash flows and the market valuation approach. The discounted cash flows model indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company's significant estimates in the discounted cash flows model include: its weighted average cost of capital; long-term rate of growth and profitability of the reporting unit's business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the reporting unit to comparable publicly traded companies in similar lines of business. Significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.
Indefinite-lived intangible assets primarily consist of acquired trade names and trademarks. The Company may first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the indefinite-lived intangible asset is not impaired, no quantitative fair value measurement is necessary. If a quantitative fair value measurement calculation is required for these intangible assets, the Company utilizes the relief-from-royalty method. This method assumes that trade names and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires the Company to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.
Operating Leases
The Company leases retail store space, certain distribution and warehouse facilities, office space and other non-real estate assets under operating leases. Operating lease agreements may contain rent escalation clauses, renewal options, rent holidays or certain landlord incentives, including tenant improvement allowances. Rent expense for non-cancelable operating leases with scheduled rent increases or landlord incentives are recognized on a straight-line basis over the lease term, beginning with the effective lease commencement date, which is generally the date in which the Company takes possession of or controls the physical use of the property. Certain leases also provide for contingent rent, which is determined as a percent of sales in excess of specified levels. A contingent rent liability is recognized together with the corresponding rent expense when specified levels have been achieved or when the Company determines that achieving the specified levels during the period is probable.
Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses a three-level hierarchy established by the Financial Accounting Standards Board ("FASB") that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach).
The levels of hierarchy are described below:
•
Level 1: Quoted prices in active markets for identical assets or liabilities.
•
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3: Unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement.
Pricing vendors are utilized for certain Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates and considers nonperformance risk of the Company and that of its counterparties.
The Company’s fair value processes include controls that are designed to ensure appropriate fair values are recorded. These controls include a comparison of fair values to another independent pricing vendor.
Refer to Note 6 — Fair Value Measurements for additional information.
Foreign Currency Translation and Foreign Currency Transactions
Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of Accumulated other comprehensive income in Total shareholders’ equity.
The Company’s global subsidiaries have various assets and liabilities, primarily receivables and payables, which are denominated in currencies other than their functional currency. These balance sheet items are subject to re-measurement, the impact of which is recorded in Other (income) expense, net, within the Consolidated Statements of Income.
Accounting for Derivatives and Hedging Activities
The Company uses derivative financial instruments to reduce its exposure to changes in foreign currency exchange rates and interest rates. All derivatives are recorded at fair value on the Consolidated Balance Sheets and changes in the fair value of derivative financial instruments are either recognized in Accumulated other comprehensive income (a component of Total shareholders’ equity), Long-term debt or Net income depending on the nature of the underlying exposure, whether the derivative is formally designated as a hedge and, if designated, the extent to which the hedge is effective. The Company classifies the cash flows at settlement from derivatives in the same category as the cash flows from the related hedged items. For undesignated hedges and designated cash flow hedges, this is primarily within the Cash provided by operations component of the Consolidated Statements of Cash Flows. For designated net investment hedges, this is within the Cash used by investing activities component of the Consolidated Statements of Cash Flows. For the Company’s fair value hedges, which are interest rate swaps used to mitigate the change in fair value of its fixed-rate debt attributable to changes in interest rates, the related cash flows from periodic interest payments are reflected within the Cash provided by operations component of the Consolidated Statements of Cash Flows. Refer to Note 16 — Risk Management and Derivatives for more information on the Company’s risk management program and derivatives.
Stock-Based Compensation
The Company estimates the fair value of options and stock appreciation rights granted under the NIKE, Inc. Stock Incentive Plan and employees’ purchase rights under the Employee Stock Purchase Plans (“ESPPs”) using the Black-Scholes option pricing model. The Company recognizes this fair value, net of estimated forfeitures, as Operating overhead expense in the Consolidated Statements of Income over the vesting period using the straight-line method.
Refer to Note 11 — Common Stock and Stock-Based Compensation for more information on the Company’s stock-based compensation programs.
Income Taxes
The Company 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. The Company records a valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized. United States income taxes are provided currently on financial statement earnings of non-U.S. subsidiaries that are expected to be repatriated. The Company determines annually the amount of undistributed non-U.S. earnings to invest indefinitely in its non-U.S. operations.
The Company recognizes a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not that the position will be sustained upon examination by relevant tax authorities. The Company recognizes interest and penalties related to income tax matters in Income tax expense.
Refer to Note 9 — Income Taxes for further discussion.
Earnings Per Share
Basic earnings per common share is calculated by dividing Net income by the weighted average number of common shares outstanding during the year. Diluted earnings per common share is calculated by adjusting weighted average outstanding shares, assuming conversion of all potentially dilutive stock options and awards.
Refer to Note 12 — Earnings Per Share for further discussion.
Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, including estimates relating to assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Recently Adopted Accounting Standards
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred taxes in the statement of financial position. The updated guidance requires that deferred tax assets and liabilities be classified as non-current in a classified balance sheet. The Company elected to early adopt ASU 2015-17 on a retrospective basis in the fourth quarter of fiscal 2016. The adoption of this standard reduced Total current assets by $389 million, increased Deferred income taxes and other assets by $386 million and reduced Total current liabilities and Deferred income taxes and other liabilities by $2 million and $1 million, respectively, on the Consolidated Balance Sheet as of May 31, 2015.
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update that replaces existing revenue recognition guidance. 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. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Based on the FASB's decision in July 2015 to defer the effective date and to allow more flexibility with implementation, the new standard will be effective for the Company beginning June 1, 2018, with early application permitted. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company has not yet selected a transition method and is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for the Company beginning June 1, 2018. The Company does not expect the adoption to have a material impact on the Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The standard is effective for the Company beginning June 1, 2019, with early application permitted. The new standard is required to be applied with a modified retrospective approach to each prior reporting period presented with optional practical expedients. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
In March 2016, the FASB Issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard is effective for the Company beginning June 1, 2017, with early application permitted. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
Inventories
Inventories
NOTE 2 — Inventories
Inventory balances of $4,838 million and $4,337 million at May 31, 2016 and 2015, respectively, were substantially all finished goods.
Property, Plant and Equipment
Property, Plant and Equipment
NOTE 3 — Property, Plant and Equipment
Property, plant and equipment, net included the following:
 
 
As of May 31,
(In millions)
 
2016
 
2015
Land
 
$
286

 
$
273

Buildings
 
1,467

 
1,250

Machinery, equipment and internal-use software
 
3,510

 
3,329

Leasehold improvements
 
1,338

 
1,150

Construction in process
 
437

 
350

Total property, plant and equipment, gross
 
7,038

 
6,352

Less accumulated depreciation
 
3,518

 
3,341

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
 
$
3,520

 
$
3,011


Capitalized interest was not material for the years ended May 31, 2016, 2015 and 2014.
Identifiable Intangible Assets and Goodwill
Identifiable Intangible Assets and Goodwill
NOTE 4 — Identifiable Intangible Assets and Goodwill

Identifiable intangible assets, net consist of indefinite-lived trademarks, which are not subject to amortization, and acquired trademarks and other intangible assets, which are subject to amortization. Indefinite-lived trademarks were $281 million at May 31, 2016 and 2015. Acquired trademarks and other intangible assets at May 31, 2016 and 2015 were $16 million and $17 million, respectively, and were fully amortized at the end of both periods. Goodwill was $131 million at May 31, 2016 and 2015 of which $65 million was included in the Converse segment for the respective periods. The remaining amounts were included in Global Brand Divisions for segment reporting purposes. There were no accumulated impairment balances for goodwill as of either period end.
Accrued Liabilities
Accrued Liabilities
NOTE 5 — Accrued Liabilities
Accrued liabilities included the following:
 
 
As of May 31,
(In millions)
 
2016
 
2015
Compensation and benefits, excluding taxes
 
$
943

 
$
997

Endorsement compensation
 
393

 
388

Dividends payable
 
271

 
240

Import and logistics costs
 
198

 
207

Fair value of derivatives
 
162

 
162

Taxes other than income taxes payable
 
159

 
172

Advertising and marketing
 
119

 
117

Collateral received from counterparties to hedging instruments
 
105

 
968

Other(1)
 
687

 
698

TOTAL ACCRUED LIABILITIES
 
$
3,037

 
$
3,949

(1)
Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at May 31, 2016 and 2015.
Fair Value Measurements
Fair Value Measurements
NOTE 6 — Fair Value Measurements
The following tables present information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of May 31, 2016 and 2015, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. Refer to Note 1 — Summary of Significant Accounting Policies for additional detail regarding the Company’s fair value measurement methodology.
 
 
As of May 31, 2016
(In millions)
 
Assets at Fair Value
 
Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
774

 
$
774

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
1,265

 
100

 
1,165

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
831

 
827

 
4

 
—

U.S. Agency securities
 
679

 
—

 
679

 
—

Commercial paper and bonds
 
733

 
262

 
471

 
—

Money market funds
 
1,175

 
1,175

 
—

 
—

Total level 2
 
3,418

 
2,264

 
1,154

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
10

 
—

 
—

 
10

TOTAL
 
$
5,467

 
$
3,138

 
$
2,319

 
$
10

 
 
 
As of May 31, 2015
(In millions)
 
Assets at Fair Value
 
Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
615

 
$
615

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
869

 
225

 
644

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
684

 
684

 
—

 
—

U.S. Agency securities
 
976

 
110

 
866

 
—

Commercial paper and bonds
 
914

 
352

 
562

 
—

Money market funds
 
1,866

 
1,866

 
—

 
—

Total level 2
 
4,440

 
3,012

 
1,428

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
8

 
—

 
—

 
8

TOTAL
 
$
5,932

 
$
3,852

 
$
2,072

 
$
8


The Company elects to record the gross assets and liabilities of its derivative financial instruments on the Consolidated Balance Sheets. The Company’s derivative financial instruments are subject to master netting arrangements that allow for the offset of assets and liabilities in the event of default or early termination of the contract. Any amounts of cash collateral received related to these instruments associated with the Company's credit-related contingent features are recorded in Cash and equivalents and Accrued liabilities, the latter of which would further offset against the Company’s derivative asset balance (refer to Note 16 — Risk Management and Derivatives). Cash collateral received related to the Company's credit related contingent features is presented in the Cash provided by operations component of the Consolidated Statements of Cash Flows. Any amounts of non-cash collateral received, such as securities, are not recorded on the Consolidated Balance Sheets pursuant to the accounting standards for non-cash collateral received.
The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of May 31, 2016 and 2015, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
 
As of May 31, 2016
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
603

 
$
487

 
$
116

 
$
145

 
$
115

 
$
30

Embedded derivatives
 
7

 
2

 
5

 
9

 
2

 
7

Interest rate swaps(2)
 
7

 
7

 
—

 
45

 
45

 
—

TOTAL
 
$
617

 
$
496

 
$
121

 
$
199

 
$
162

 
$
37

(1)
If the foreign exchange derivative instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $136 million as of May 31, 2016. As of that date, the Company had received $105 million of cash collateral from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2016.
(2)
As of May 31, 2016, no amount of cash collateral had been received or posted on the derivative asset and liability balances related to the Company's interest rate swaps.
 
 
As of May 31, 2015
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
1,554

 
$
1,034

 
$
520

 
$
164

 
$
160

 
$
4

Embedded derivatives
 
7

 
2

 
5

 
11

 
2

 
9

Interest rate swaps(2)
 
78

 
78

 
—

 
—

 
—

 
—

TOTAL
 
$
1,639

 
$
1,114

 
$
525

 
$
175

 
$
162

 
$
13

(1)
If the foreign exchange derivative instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $161 million as of May 31, 2015. As of that date, the Company had received $900 million of cash collateral and $74 million of securities from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2015.
(2)
As of May 31, 2015, the Company had received $68 million of cash collateral related to its interest rate swaps.
Available-for-sale securities comprise investments in U.S. Treasury and Agency securities, money market funds, corporate commercial paper and bonds. These securities are valued using market prices on both active markets (Level 1) and less active markets (Level 2). As of May 31, 2016, the Company held $2,113 million of available-for-sale securities with maturity dates within one year and $206 million with maturity dates over one year and less than five years within Short-term investments on the Consolidated Balance Sheets. The gross realized gains and losses on sales of available-for-sale securities were immaterial for the fiscal years ended May 31, 2016 and 2015. Unrealized gains and losses on available-for-sale securities included in Other comprehensive income were immaterial as of May 31, 2016 and 2015. The Company regularly reviews its available-for-sale securities for other-than-temporary impairment. For the years ended May 31, 2016 and 2015, the Company did not consider its securities to be other-than-temporarily impaired and accordingly, did not recognize any impairment losses.
Included in Interest expense (income), net was interest income related to the Company's available-for-sale securities of $12 million, $6 million and $5 million for the years ended May 31, 2016, 2015 and 2014, respectively.
The Company’s Level 3 assets comprise investments in certain non-marketable preferred stock. These Level 3 investments are an immaterial portion of the Company's portfolio. Changes in Level 3 investment assets were immaterial during the years ended May 31, 2016 and 2015.
No transfers among the levels within the fair value hierarchy occurred during the years ended May 31, 2016 or 2015.
Derivative financial instruments include foreign exchange forwards and options, embedded derivatives and interest rate swaps. Refer to Note 16 — Risk Management and Derivatives for additional detail. For fair value information regarding Notes payable and Long-term debt, refer to Note 7 — Short-Term Borrowings and Credit Lines and Note 8 — Long-Term Debt, respectively.
As of May 31, 2016 and May 31, 2015, assets or liabilities that were required to be measured at fair value on a non-recurring basis were immaterial.
At May 31, 2015, the Company had $150 million of outstanding receivables related to its investments in reverse repurchase agreements recorded within Prepaid expenses and other current assets on the Consolidated Balance Sheets. The carrying amount of these agreements approximates their fair value based upon observable inputs other than quoted prices (Level 2). The reverse repurchase agreements are fully collateralized. At May 31, 2016, there were no outstanding receivables related to investments in reverse repurchase agreements.
Short-Term Borrowings and Credit Lines
Short-Term Borrowings and Credit Lines
NOTE 7 — Short-Term Borrowings and Credit Lines
Notes payable and interest-bearing accounts payable to Sojitz Corporation of America (“Sojitz America”) as of May 31, 2016 and 2015 are summarized below:
 
 
As of May 31,
 
 
 
2016
 
2015
(Dollars in millions)
 
Borrowings

 
Interest Rate
 
Borrowings

 
Interest Rate
Notes payable:
 
 
 
 
 
 
 
 
 
 
U.S. operations
 
$
—

 
0.00
%
(1) 
 
$
—

 
0.00
%
(1) 
Non-U.S. operations
 
1

 
13.00
%
(1) 
 
74

 
12.39
%
(1) 
TOTAL NOTES PAYABLE
 
$
1

 
 
 
 
$
74

 
 
 
Interest-bearing accounts payable:
 
 
 
 
 
 
 
 
 
 
Sojitz America
 
$
39

 
1.27
%
 
 
$
78

 
0.98
%
 
(1)
Weighted average interest rate includes non-interest bearing overdrafts.
The carrying amounts reflected in the Consolidated Balance Sheets for Notes payable approximate fair value.
The Company purchases through Sojitz America certain NIKE Brand products it acquires from non-U.S. suppliers. These purchases are for products sold in certain countries in the Company's Emerging Markets geographic operating segment and Canada, excluding products produced and sold in the same country. Accounts payable to Sojitz America are generally due up to 60 days after shipment of goods from the foreign port. The interest rate on such accounts payable is the 60-day London Interbank Offered Rate (“LIBOR”) as of the beginning of the month of the invoice date, plus 0.75%.
As of May 31, 2016 and 2015, the Company had no amounts outstanding under its $2 billion commercial paper program.
On August 28, 2015, the Company entered into a committed credit facility agreement with a syndicate of banks which provides for up to $2 billion of borrowings. The facility matures August 28, 2020, with a one year extension option prior to any anniversary of the closing date, provided that in no event shall it extend beyond August 28, 2022. Based on the Company’s current long-term senior unsecured debt ratings of AA- and A1 from Standard and Poor’s Corporation and Moody’s Investor Services, respectively, the interest rate charged on any outstanding borrowings would be the prevailing LIBOR plus 0.455%. The facility fee is 0.045% of the total commitment. Under this committed credit facility, the Company must maintain certain financial ratios, among other things, with which the Company was in compliance at May 31, 2016. This facility replaces the prior $1 billion credit facility agreement entered into on November 1, 2011, which would have matured November 1, 2017. No amounts were outstanding under either committed credit facility as of May 31, 2016 or 2015.
Long-Term Debt
Long-Term Debt
NOTE 8 — Long-Term Debt
Long-term debt, net of unamortized premiums and discounts and swap fair value adjustments, comprises the following: 
 
 
 
 
 
 
 
 
Book Value Outstanding
As of May 31,
Scheduled Maturity (Dollars and Yen in millions)
 
Original
Principal
 
Interest
Rate
 
Interest
Payments
 
2016
 
2015
Corporate Bond Payables:(1)
 
 
 
 
 
 
 
 
 
 
October 15, 2015(2)
 
$
100

 
5.15
%
 
Semi-Annually
 
$
—

 
$
101

May 1, 2023(3)
 
$
500

 
2.25
%
 
Semi-Annually
 
499

 
499

May 1, 2043(3)
 
$
500

 
3.63
%
 
Semi-Annually
 
499

 
499

November 1, 2045(4)
 
$
1,000

 
3.88
%
 
Semi-Annually
 
991

 
—

Promissory Notes:
 
 
 
 
 
 
 
 
 
 
April 1, 2017(5)
 
$
40

 
6.20
%
 
Monthly
 
38

 
39

January 1, 2018(5)
 
$
19

 
6.79
%
 
Monthly
 
—

 
19

Japanese Yen Notes:
 
 
 
 
 
 
 
 
 
 
August 20, 2001 through November 20, 2020(6)
 
¥
9,000

 
2.60
%
 
Quarterly
 
18

 
20

August 20, 2001 through November 20, 2020(6)
 
¥
4,000

 
2.00
%
 
Quarterly
 
9

 
9

Total
 
 
 
 
 
 
 
2,054

 
1,186

Less current maturities
 
 

 
 

 
 
 
44

 
107

TOTAL LONG-TERM DEBT
 
 
 
 
 
 
 
$
2,010

 
$
1,079

(1)
These senior unsecured obligations rank equally with the Company's other unsecured and unsubordinated indebtedness.
(2)
The Company has entered into interest rate swap agreements whereby the Company receives fixed interest payments at the same rate as the note and pays variable interest payments based on the six-month LIBOR plus a spread. The swaps have the same notional amount and maturity date as the corresponding note. On October 15, 2015, the Company repaid the long-term debt which had previously been hedged with these interest rate swaps. Accordingly, as of May 31, 2016, the Company had no interest rate swaps designated as fair value hedges.
(3)
The bonds are redeemable at the Company's option prior to February 1, 2023 and November 1, 2042, respectively, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to February 1, 2023 and November 1, 2042, respectively, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest.
(4)
The bonds are redeemable at the Company's option prior to May 1, 2045, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to May 1, 2045, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest.
(5)
The Company assumed a total of $59 million in bonds payable as part of its agreement to purchase certain Corporate properties; this was treated as a non-cash financing transaction. The property serves as collateral for the debt. The purchase of these properties was accounted for as a business combination where the total consideration of $85 million was allocated to the land and buildings acquired; no other tangible or intangible assets or liabilities resulted from the purchase. The bonds mature in 2017 and 2018 and the Company does not have the ability to re-negotiate the terms of the debt agreements and would incur significant financial penalties if the notes were paid-off prior to maturity. During the year ended May 31, 2016, the notes due January 1, 2018 were legally defeased and an insignificant loss on defeasance was recognized.
(6)
NIKE Logistics YK assumed a total of ¥13.0 billion in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. These loans mature in equal quarterly installments during the period August 20, 2001 through November 20, 2020.
The scheduled maturity of Long-term debt in each of the years ending May 31, 2017 through 2021 are $44 million, $6 million, $6 million, $6 million and $3 million, respectively, at face value.
The Company's Long-term debt is recorded at adjusted cost, net of unamortized premiums and discounts and interest rate swap fair value adjustments. The fair value of Long-term debt is estimated based upon quoted prices for similar instruments or quoted prices for identical instruments in inactive markets (Level 2). The fair value of the Company’s Long-term debt, including the current portion, was approximately $2,125 million at May 31, 2016 and $1,160 million at May 31, 2015.
Income Taxes
Income Taxes
NOTE 9 — Income Taxes
Income before income taxes is as follows:
 
 
Year Ended May 31,
(In millions)
 
2016
 
2015
 
2014
Income before income taxes:
 
 
 
 
 
 
United States
 
$
956

 
$
1,967

 
$
3,066

Foreign
 
3,667

 
2,238

 
478

TOTAL INCOME BEFORE INCOME TAXES
 
$
4,623

 
$
4,205

 
$
3,544


The provision for income taxes is as follows:
 
 
Year Ended May 31,
(In millions)
 
2016
 
2015
 
2014
Current:
 
 
 
 
 
 
United States
 
 
 
 
 
 
Federal
 
$
304

 
$
596

 
$
259

State
 
71

 
80

 
104

Foreign
 
568

 
369

 
499

Total
 
943

 
1,045

 
862

Deferred:
 
 
 
 
 
 
United States
 
 
 
 
 
 
Federal
 
(57
)
 
(66
)
 
19

State
 
(16
)
 
(11
)
 
(3
)
Foreign
 
(7
)
 
(36
)
 
(27
)
Total
 
(80
)
 
(113
)
 
(11
)
TOTAL INCOME TAX EXPENSE
 
$
863

 
$
932

 
$
851


A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:
 
 
Year Ended May 31,
  
 
2016
 
2015
 
2014
Federal income tax rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
State taxes, net of federal benefit
 
1.1
 %
 
0.9
 %
 
1.8
 %
Foreign earnings
 
-18.6
 %
 
-15.7
 %
 
2.2
 %
Deferred charge
 
0.4
 %
 
0.9
 %
 
-14.6
 %
Other, net
 
0.8
 %
 
1.1
 %
 
-0.4
 %
EFFECTIVE INCOME TAX RATE
 
18.7
 %
 
22.2
 %
 
24.0
 %

The effective tax rate for the year ended May 31, 2016 was 350 basis points lower than the effective tax rate for the year ended May 31, 2015 primarily due to an increase in the proportion of earnings from operations outside of the United States, which are generally subject to a lower tax rate.
The effective tax rate for the year ended May 31, 2015 was 180 basis points lower than the effective tax rate for the year ended May 31, 2014 primarily due to the favorable resolution of audits in several jurisdictions.

Deferred tax assets and liabilities comprise the following: 
 
 
As of May 31,
(In millions)
 
2016
 
2015
Deferred tax assets:
 
 
 
 
Allowance for doubtful accounts
 
$
5

 
$
11

Inventories
 
88

 
59

Sales return reserves
 
182

 
143

Deferred compensation
 
274

 
258

Stock-based compensation
 
206

 
179

Reserves and accrued liabilities
 
78

 
92

Net operating loss carry-forwards
 
44

 
10

Undistributed earnings of foreign subsidiaries
 
179

 
149

Other
 
72

 
76

Total deferred tax assets
 
1,128

 
977

Valuation allowance
 
(52
)
 
(9
)
Total deferred tax assets after valuation allowance
 
1,076

 
968

Deferred tax liabilities:
 
 
 
 
Property, plant and equipment
 
(268
)
 
(220
)
Intangibles
 
(92
)
 
(93
)
Other
 
(4
)
 
(38
)
Total deferred tax liability
 
(364
)
 
(351
)
NET DEFERRED TAX ASSET
 
$
712

 
$
617


The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits:
 
 
As of May 31,
(In millions)
 
2016
 
2015
 
2014
Unrecognized tax benefits, beginning of the period
 
$
438

 
$
506

 
$
447

Gross increases related to prior period tax positions(1)
 
49

 
32

 
814

Gross decreases related to prior period tax positions(1)
 
(20
)
 
(123
)
 
(166
)
Gross increases related to current period tax positions
 
81

 
82

 
125

Gross decreases related to current period tax positions
 
—

 
(9
)
 
(30
)
Settlements(1)
 
(13
)
 
(27
)
 
(676
)
Lapse of statute of limitations
 
(17
)
 
(10
)
 
(4
)
Changes due to currency translation
 
(12
)
 
(13
)
 
(4
)
UNRECOGNIZED TAX BENEFITS, END OF THE PERIOD
 
$
506

 
$
438

 
$
506


(1)
During the fourth quarter of the fiscal year ended May 31, 2014, the Company reached a resolution with the IRS on a U.S. Unilateral Advanced Pricing Agreement that covers intercompany transfer pricing for fiscal years 2011 through 2020. As a result, the Company recorded a gross increase in unrecognized tax benefits related to prior period tax positions, a gross decrease in unrecognized tax benefits related to prior period tax positions and a settlement. The net impact of these items resulted in a decrease to unrecognized tax benefits.
As of May 31, 2016, total gross unrecognized tax benefits, excluding related interest and penalties, were $506 million, $290 million of which would affect the Company's effective tax rate if recognized in future periods.
The Company recognizes interest and penalties related to income tax matters in Income tax expense. The liability for payment of interest and penalties increased by $45 million during the year ended May 31, 2016, decreased by $3 million during the year ended May 31, 2015 and increased by $55 million during the year ended May 31, 2014. As of May 31, 2016 and 2015, accrued interest and penalties related to uncertain tax positions were $209 million and $164 million, respectively (excluding federal benefit).
The Company incurs tax liabilities primarily in the United States, China and the Netherlands, as well as various state and other foreign jurisdictions. The Company is currently under audit by the U.S. Internal Revenue Service (“IRS”) for fiscal years 2013 through 2015. The Company has closed all U.S. federal income tax matters through fiscal 2012, with the exception of the validation of foreign tax credits utilized. During the year ended May 31, 2016, the Company received from the IRS a statutory notice of deficiency for fiscal 2012, proposing an increase in tax of $223 million, subject to interest, related to the foreign tax credit matter. The Company intends to contest this deficiency notice. As previously disclosed, the Company received a statutory notice of deficiency for fiscal 2011, proposing an increase in tax of $31 million, subject to interest, related to the foreign tax credit matter. This notice also reported a decrease in foreign tax credit carryovers for fiscal 2010 and 2011. The Company has contested this deficiency notice by filing a petition with the U.S Tax Court in April 2015. The Company does not expect the outcome of this matter to have a material impact on the financial statements. No payments on the assessment would be required until the dispute is definitively resolved. Based on the information currently available, the Company does not anticipate a significant increase or decrease to its unrecognized tax benefits for this matter within the next 12 months.
The Company’s major foreign jurisdictions, China and the Netherlands, have concluded substantially all income tax matters through calendar 2005 and fiscal 2010, respectively. Although the timing of resolution of audits is not certain, the Company evaluates all domestic and foreign audit issues in the aggregate, along with the expiration of applicable statutes of limitations, and estimates that it is reasonably possible the total gross unrecognized tax benefits could decrease by up to $92 million within the next 12 months.
The Company provides for U.S. income taxes on the undistributed earnings of foreign subsidiaries unless they are considered indefinitely reinvested outside the United States. At May 31, 2016, the indefinitely reinvested earnings in foreign subsidiaries upon which United States income taxes have not been provided were approximately $10.7 billion. If these undistributed earnings were repatriated to the United States or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, they would generate foreign tax credits that would reduce the federal tax liability associated with the foreign dividend or the otherwise taxable transaction. Assuming a full utilization of the foreign tax credits, the potential net deferred tax liability associated with these temporary differences of undistributed earnings would be approximately $3.6 billion at May 31, 2016.
A portion of the Company's foreign operations are benefiting from a tax holiday, which is set to expire in 2021. This tax holiday may be extended when certain conditions are met or may be terminated early if certain conditions are not met. The impact of this tax holiday decreased foreign taxes by $173 million, $174 million and $138 million for the fiscal years ended May 31, 2016, 2015 and 2014, respectively. The benefit of the tax holiday on diluted earnings per common share was $0.10, $0.10 and $0.08 for the fiscal years ended May 31, 2016, 2015 and 2014, respectively.
Deferred tax assets at May 31, 2016 and 2015 were reduced by a valuation allowance relating to tax benefits of certain subsidiaries with operating losses. There was a $43 million net increase in the valuation allowance for the year ended May 31, 2016, compared to no net change and a net increase of $4 million for the years ended May 31, 2015 and 2014, respectively.
The Company has available domestic and foreign loss carry-forwards of $143 million at May 31, 2016. Such losses will expire as follows: 
 
 
Year Ending May 31,
(In millions)
 
2017
 
2018
 
2019
 
2020
 
2021-2035
 
Indefinite

 
Total

Net operating losses
 
$
1

 
$
4

 
$
1

 
$
1

 
$
35

 
$
101

 
$
143


During the years ended May 31, 2016, 2015 and 2014, income tax benefits attributable to employee stock-based compensation transactions of $281 million, $224 million and $135 million, respectively, were allocated to Total shareholders’ equity.
Redeemable Preferred Stock
Redeemable Preferred Stock
NOTE 10 — Redeemable Preferred Stock
Sojitz America is the sole owner of the Company’s authorized redeemable preferred stock, $1 par value, which is redeemable at the option of Sojitz America or the Company at par value aggregating $0.3 million. A cumulative dividend of $0.10 per share is payable annually on May 31 and no dividends may be declared or paid on the common stock of the Company unless dividends on the redeemable preferred stock have been declared and paid in full. There have been no changes in the redeemable preferred stock in the three years ended May 31, 2016, 2015 and 2014. As the holder of the redeemable preferred stock, Sojitz America does not have general voting rights, but does have the right to vote as a separate class on the sale of all or substantially all of the assets of the Company and its subsidiaries, on merger, consolidation, liquidation or dissolution of the Company or on the sale or assignment of the NIKE trademark for athletic footwear sold in the United States. The redeemable preferred stock has been fully issued to Sojitz America and is not blank check preferred stock. The Company's articles of incorporation do not permit the issuance of additional preferred stock.
Common Stock and Stock-Based Compensation
Common Stock and Stock-Based Compensation
NOTE 11 — Common Stock and Stock-Based Compensation
The authorized number of shares of Class A Common Stock, no par value, and Class B Common Stock, no par value, are 400 million and 2,400 million, respectively. Each share of Class A Common Stock is convertible into one share of Class B Common Stock. Voting rights of Class B Common Stock are limited in certain circumstances with respect to the election of directors. There are no differences in the dividend and liquidation preferences or participation rights of the Class A and Class B common shareholders.
The NIKE, Inc. Stock Incentive Plan (the "Stock Incentive Plan") provides for the issuance of up to 718 million previously unissued shares of Class B Common Stock in connection with stock options and other awards granted under the Stock Incentive Plan. The Stock Incentive Plan authorizes the grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and performance-based awards. The exercise price for stock options and stock appreciation rights may not be less than the fair market value of the underlying shares on the date of grant. A committee of the Board of Directors administers the Stock Incentive Plan. The committee has the authority to determine the employees to whom awards will be made, the amount of the awards and the other terms and conditions of the awards. Substantially all stock option grants outstanding under the Stock Incentive Plan are granted in the first quarter of each fiscal year, vest ratably over four years and expire ten years from the date of grant.
The following table summarizes the Company’s total stock-based compensation expense recognized in Operating overhead expense: 
 
 
Year Ended May 31,
(In millions)
 
2016
 
2015
 
2014
Stock options(1)
 
$
171

 
$
136

 
$
125

ESPPs
 
31

 
24

 
22

Restricted stock
 
34

 
31

 
30

TOTAL STOCK-BASED COMPENSATION EXPENSE
 
$
236

 
$
191

 
$
177

(1)
Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. Accelerated stock option expense for the years ended May 31, 2016, 2015 and 2014 was $30 million, $19 million and $15 million, respectively.
As of May 31, 2016, the Company had $245 million of unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized in Operating overhead expense over a weighted average period of 2.0 years.
The weighted average fair value per share of the options granted during the years ended May 31, 2016, 2015 and 2014, as computed using the Black-Scholes pricing model, was $12.66, $8.48 and $7.45, respectively. The weighted average assumptions used to estimate these fair values are as follows:
 
 
Year Ended May 31,
  
 
2016
 
2015
 
2014
Dividend yield
 
1.0
%
 
1.2
%
 
1.3
%
Expected volatility
 
23.6
%
 
23.6
%
 
27.9
%
Weighted average expected life (in years)
 
5.8

 
5.8

 
5.3

Risk-free interest rate
 
1.7
%
 
1.7
%
 
1.3
%

The Company estimates the expected volatility based on the implied volatility in market traded options on the Company’s common stock with a term greater than 1 year, along with other factors. The weighted average expected life of options is based on an analysis of historical and expected future exercise patterns. The interest rate is based on the U.S. Treasury (constant maturity) risk-free rate in effect at the date of grant for periods corresponding with the expected term of the options.
The following summarizes the stock option transactions under the plan discussed above: 
 
 
Shares(1)
 
Weighted Average
Option Price
  
 
(In millions)
 
  
Options outstanding May 31, 2013
 
135.3

 
$
17.36

Exercised
 
(22.0
)
 
14.15

Forfeited
 
(2.5
)
 
24.17

Granted
 
16.3

 
31.77

Options outstanding May 31, 2014
 
127.1

 
19.64

Exercised
 
(27.2
)
 
15.39

Forfeited
 
(2.1
)
 
29.51

Granted
 
18.4

 
38.84

Options outstanding May 31, 2015
 
116.2

 
23.50

Exercised
 
(22.5
)
 
17.75

Forfeited
 
(2.3
)
 
39.96

Granted
 
20.6

 
56.41

Options outstanding May 31, 2016
 
112.0

 
$
30.38

Options exercisable at May 31,
 
 
 
 
2014
 
74.0

 
$
15.71

2015
 
68.6

 
18.26

2016
 
66.5

 
21.48

(1)
Includes stock appreciation rights transactions.
The weighted average contractual life remaining for options outstanding and options exercisable at May 31, 2016 was 6.0 years and 4.6 years, respectively. The aggregate intrinsic value for options outstanding and exercisable at May 31, 2016 was $2,806 million and $2,242 million, respectively. The aggregate intrinsic value was the amount by which the market value of the underlying stock exceeded the exercise price of the options. The total intrinsic value of the options exercised during the years ended May 31, 2016, 2015 and 2014 was $946 million, $795 million and $474 million, respectively.
In addition to the Stock Incentive Plan, the Company gives employees the right to purchase shares at a discount to the market price under employee stock purchase plans (“ESPPs”). Employees are eligible to participate through payroll deductions of up to 10% of their compensation. At the end of each 6-month offering period, shares are purchased by the participants at 85% of the lower of the fair market value at the beginning or the end of the offering period. Employees purchased 2.5 million, 2.7 million and 2.8 million shares during each of the three years ended May 31, 2016, 2015 and 2014, respectively.
From time to time, the Company grants restricted stock and restricted stock units to key employees under the Stock Incentive Plan. The number of shares underlying such awards granted to employees during the years ended May 31, 2016, 2015 and 2014 were 1 million, 0.5 million and 0.6 million, respectively, with weighted average values per share of $54.87, $39.69 and $31.94, respectively. Recipients of restricted stock are entitled to cash dividends and to vote their respective shares throughout the period of restriction. Recipients of restricted stock units are entitled to dividend equivalent cash payments upon vesting. The value of all grants of restricted stock and restricted stock units was established by the market price on the date of grant. During the years ended May 31, 2016, 2015 and 2014, the aggregate fair value of restricted stock and restricted stock units vested was $49 million, $20 million and $28 million, respectively, determined as of the date of vesting. As of May 31, 2016, the Company had $62 million of unrecognized compensation costs from restricted stock and restricted stock units to be recognized in Operating overhead expense over a weighted average period of 2.8 years.
Earnings Per Share
Earnings Per Share
NOTE 12 — Earnings Per Share
The following is a reconciliation from basic earnings per common share to diluted earnings per common share. The computations of diluted earnings per common share excluded options, including shares under employee stock purchase plans (“ESPPs”), to purchase an additional 0.2 million, 1.7 million and 1.5 million shares of common stock outstanding for the years ended May 31, 2016, 2015 and 2014, respectively, because the options were anti-dilutive.
 
 
Year Ended May 31,
(In millions, except per share data)
 
2016
 
2015
 
2014
Determination of shares:
 
 
 
 
 
 
Weighted average common shares outstanding
 
1,697.9

 
1,723.5

 
1,766.7

Assumed conversion of dilutive stock options and awards
 
44.6

 
45.3

 
44.9

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
1,742.5

 
1,768.8

 
1,811.6

 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
Basic
 
$
2.21

 
$
1.90

 
$
1.52

Diluted
 
$
2.16

 
$
1.85

 
$
1.49

Benefit Plans
Benefit Plans
NOTE 13 — Benefit Plans
The Company has a qualified 401(k) Savings and Profit Sharing Plan, in which all U.S. employees are able to participate. The Company matches a portion of employee contributions to the savings plan. Company contributions to the savings plan were $72 million, $58 million and $51 million and included in Operating overhead expense for the years ended May 31, 2016, 2015 and 2014, respectively. The terms of the plan also allow for annual discretionary profit sharing contributions, as determined by the Board of Directors, to the accounts of eligible U.S. employees who work at least 1,000 hours in a year. Profit sharing contributions of $64 million, $58 million and $49 million were made to the plan and included in Operating overhead expense for the years ended May 31, 2016, 2015 and 2014, respectively.
The Company also has a Long-Term Incentive Plan (“LTIP”) that was adopted by the Board of Directors and approved by shareholders in September 1997 and later amended in fiscal 2007. The Company recognized $85 million, $68 million and $46 million of Operating overhead expense related to cash awards under the LTIP during the years ended May 31, 2016, 2015 and 2014, respectively.
The Company allows certain highly compensated employees and non-employee directors of the Company to defer compensation under a nonqualified deferred compensation plan. Deferred compensation plan liabilities were $475 million and $443 million at May 31, 2016 and 2015, respectively, and primarily classified as long-term in Deferred income taxes and other liabilities.
The Company has pension plans in various countries worldwide. The pension plans are only available to local employees and are generally government mandated. The liability related to the unfunded pension liabilities of the plans was $93 million and $98 million at May 31, 2016 and 2015, respectively, and primarily classified as long-term in Deferred income taxes and other liabilities.
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income
NOTE 14 — Accumulated Other Comprehensive Income
The changes in Accumulated other comprehensive income, net of tax, were as follows:
(In millions)
 
Foreign Currency Translation Adjustment(1)(2)
 
Cash Flow Hedges
 
Net Investment Hedges(1)(2)
 
Other
 
Total
Balance at May 31, 2015
 
$
(31
)
 
$
1,220

 
$
115

 
$
(58
)
 
$
1,246

Other comprehensive gains (losses) before reclassifications(3)
 
(178
)
 
(47
)
 
—

 
6

 
(219
)
Reclassifications to net income of previously deferred (gains) losses(4)
 
2

 
(710
)
 
—

 
(1
)
 
(709
)
Other comprehensive income (loss)
 
(176
)
 
(757
)
 
—

 
5

 
(928
)
Balance at May 31, 2016
 
$
(207
)
 
$
463

 
$
115

 
$
(53
)
 
$
318

(1)
The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
(2)
Beginning balances have been updated to reflect the proper classification of $20 million of deferred tax balances between Foreign Currency Translation Adjustment and Net Investment Hedges.
(3)
Net of tax benefit (expense) of $0 million, $28 million, $0 million, $(2) million and $26 million, respectively.
(4)
Net of tax (benefit) expense of $0 million, $7 million, $0 million, $2 million and $9 million, respectively.
(In millions)
 
Foreign Currency Translation Adjustment(1)(2)
 
Cash Flow Hedges
 
Net Investment Hedges(1)(2)
 
Other
 
Total
Balance at May 31, 2014
 
$
(11
)
 
$
32

 
$
115

 
$
(51
)
 
$
85

Other comprehensive gains (losses) before reclassifications(3)
 
(20
)
 
1,447

 
—

 
33

 
1,460

Reclassifications to net income of previously deferred (gains) losses(4)
 
—

 
(259
)
 
—

 
(40
)
 
(299
)
Other comprehensive income (loss)
 
(20
)
 
1,188

 
—

 
(7
)
 
1,161

Balance at May 31, 2015
 
$
(31
)
 
$
1,220

 
$
115

 
$
(58
)
 
$
1,246

(1)
The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
(2)
Beginning and ending balances have been updated to reflect the proper classification of $20 million of deferred tax balances between Foreign Currency Translation Adjustment and Net Investment Hedges.
(3)
Net of tax benefit (expense) of $0 million, $(33) million, $0 million, $0 million and $(33) million, respectively.
(4)
Net of tax (benefit) expense of $0 million, $2 million, $0 million, $0 million and $2 million, respectively.
The following table summarizes the reclassifications from Accumulated other comprehensive income to the Consolidated Statements of Income:
 
 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
 
Year Ended May 31,
(In millions)
 
2016
 
2015
Gains (losses) on foreign currency translation adjustment
 
$
(2
)
 
$
—

Other (income) expense, net
Total before tax
 
(2
)
 
—

 
Tax (expense) benefit
 
—

 
—

 
Gain (loss) net of tax
 
(2
)
 
—

 
Gains (losses) on cash flow hedges:
 
 
 
 
 
Foreign exchange forwards and options
 
(88
)
 
(95
)
Revenues
Foreign exchange forwards and options
 
586

 
220

Cost of sales
Foreign exchange forwards and options
 
—

 
—

Total selling and administrative expense
Foreign exchange forwards and options
 
219

 
136

Other (income) expense, net
Total before tax
 
717

 
261

 
Tax (expense) benefit
 
(7
)
 
(2
)
 
Gain (loss) net of tax
 
710

 
259

 
Gains (losses) on other
 
3

 
40

Other (income) expense, net
Total before tax
 
3

 
40

 
Tax (expense) benefit
 
(2
)
 
—

 
Gain (loss) net of tax
 
1

 
40

 
Total net gain (loss) reclassified for the period
 
$
709

 
$
299

 

Refer to Note 16 — Risk Management and Derivatives for more information on the Company's risk management program and derivatives.
Commitments and Contingencies
Commitments and Contingencies
NOTE 15 — Commitments and Contingencies
The Company leases retail store space, certain distribution and warehouse facilities, and office space and other non-real estate assets under operating leases expiring from 1 to 18 years after May 31, 2016. Rent expense was $661 million, $594 million and $533 million for the years ended May 31, 2016, 2015 and 2014, respectively. Amounts of minimum future annual commitments under non-cancelable operating and capital leases are as follows (in millions):
 
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Operating leases
 
$
491

 
$
453

 
$
395

 
$
347

 
$
301

 
$
1,244

 
$
3,231

Capital leases
 
$
7

 
$
5

 
$
2

 
$
1

 
$
—

 
$
—

 
$
15


As of May 31, 2016 and 2015, the Company had letters of credit outstanding totaling $157 million and $165 million, respectively. These letters of credit were generally issued for the purchase of inventory and guarantees of the Company’s performance under certain self-insurance and other programs.
In connection with various contracts and agreements, the Company provides routine indemnification relating to the enforceability of intellectual property rights, coverage for legal issues that arise and other items where the Company is acting as the guarantor. Currently, the Company has several such agreements in place. However, based on the Company’s historical experience and the estimated probability of future loss, the Company has determined that the fair value of such indemnification is not material to the Company’s financial position or results of operations.
In the ordinary course of its business, the Company is involved in various legal proceedings involving contractual and employment relationships, product liability claims, trademark rights and a variety of other matters. While the Company cannot predict the outcome of its pending legal matters with certainty, the Company does not believe any currently identified claim, proceeding or litigation, either individually or in aggregate, will have a material impact on the Company’s results of operations, financial position or cash flows.
Risk Management and Derivatives
Risk Management and Derivatives
NOTE 16 — Risk Management and Derivatives
The Company is exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates, and uses derivatives to manage financial exposures that occur in the normal course of business. The Company does not hold or issue derivatives for trading or speculative purposes.
The Company may elect to designate certain derivatives as hedging instruments under the accounting standards for derivatives and hedging. The Company formally documents all relationships between designated hedging instruments and hedged items as well as its risk management objectives and strategies for undertaking hedge transactions. This process includes linking all derivatives designated as hedges to either recognized assets or liabilities or forecasted transactions.
The majority of derivatives outstanding as of May 31, 2016 are designated as foreign currency cash flow hedges, primarily for Euro/U.S. Dollar, British Pound/Euro and Japanese Yen/U.S. Dollar currency pairs. All derivatives are recognized on the Consolidated Balance Sheets at fair value and classified based on the instrument’s maturity date.
The following table presents the fair values of derivative instruments included within the Consolidated Balance Sheets as of May 31, 2016 and 2015: 
 
 
Asset Derivatives
 
Liability Derivatives
(In millions)
 
Balance Sheet
Location
 
2016
 
2015
 
Balance Sheet 
Location
 
2016
 
2015
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
447

 
$
825

 
Accrued liabilities
 
$
38

 
$
140

Interest rate swaps
 
Prepaid expenses and other current assets
 
7

 
78

 
Accrued liabilities
 
45

 
—

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
90

 
520

 
Deferred income taxes and other liabilities
 
12

 
4

Interest rate swaps
 
Deferred income taxes and other assets
 
—

 
—

 
Deferred income taxes and other liabilities
 
—

 
—

Total derivatives formally designated as hedging instruments
 
 
 
544

 
1,423

 
 
 
95

 
144

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
40

 
209

 
Accrued liabilities
 
76

 
20

Embedded derivatives
 
Prepaid expenses and other current assets
 
2

 
2

 
Accrued liabilities
 
2

 
2

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
26

 
—

 
Deferred income taxes and other liabilities
 
19

 
—

Embedded derivatives
 
Deferred income taxes and other assets
 
5

 
5

 
Deferred income taxes and other liabilities
 
7

 
9

Total derivatives not designated as hedging instruments
 
 
 
73

 
216

 
 
 
104

 
31

TOTAL DERIVATIVES
 
 
 
$
617

 
$
1,639

 
 
 
$
199

 
$
175


The following tables present the amounts affecting the Consolidated Statements of Income for the years ended May 31, 2016, 2015 and 2014:

(In millions)
 
Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
on Derivatives(1)
 
Amount of Gain (Loss)
Reclassified From Accumulated
Other Comprehensive Income into Income(1)
Year Ended May 31,
 
Location of Gain (Loss) Reclassified From 
Accumulated Other Comprehensive Income Into Income
 
Year Ended May 31,
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
2015
 
2014
 
 
2016
 
2015
 
2014
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
90

 
$
(202
)
 
$
(48
)
 
Revenues
 
$
(88
)
 
$
(95
)
 
$
14

Foreign exchange forwards and options
 
(57
)
 
1,109

 
(78
)
 
Cost of sales
 
586

 
220

 
12

Foreign exchange forwards and options
 
—

 
—

 
4

 
Total selling and administrative expense
 
—

 
—

 
—

Foreign exchange forwards and options
 
(25
)
 
497

 
(21
)
 
Other (income) expense, net
 
219

 
136

 
10

Interest rate swaps
 
(83
)
 
76

 
—

 
Interest expense (income), net
 
—

 
—

 
—

Total designated cash flow hedges
 
(75
)
 
1,480

 
(143
)
 
 
 
717

 
261

 
36

Derivatives designated as net investment hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
—

 
$
—

 
$
—

 
Other (income) expense, net
 
$
—

 
$
—

 
$
—

(1)
For the years ended May 31, 2016, 2015 and 2014, the amounts recorded in Other (income) expense, net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.
 
 
Amount of Gain (Loss) Recognized in
Income on Derivatives
 
Location of Gain (Loss) 
Recognized in Income on Derivatives
 
 
Year Ended May 31,
 
(In millions)
 
2016
 
2015
 
2014
 
Derivatives designated as fair value hedges:
 
 
 
 
 
 
 
 
Interest rate swaps(1)
 
$
2

 
$
5

 
$
5

 
Interest expense (income), net
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
(68
)
 
611

 
(75
)
 
Other (income) expense, net
Embedded derivatives
 
$
(2
)
 
$
(1
)
 
$
(1
)
 
Other (income) expense, net
(1)
All interest rate swaps designated as fair value hedges meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt. Refer to “Fair Value Hedges” in this note for additional detail.
Refer to Note 6 — Fair Value Measurements for a description of how the above financial instruments are valued and Note 14 — Accumulated Other Comprehensive Income and the Consolidated Statements of Shareholders’ Equity for additional information on changes in Accumulated other comprehensive income for the years ended May 31, 2016, 2015 and 2014.
Cash Flow Hedges
The purpose of the Company's foreign exchange risk management program is to lessen both the positive and negative effects of currency fluctuations on the Company's consolidated results of operations, financial position and cash flows. Foreign currency exposures that the Company may elect to hedge in this manner include product cost exposures, non-functional currency denominated external and intercompany revenues, selling and administrative expenses, investments in U.S. Dollar-denominated available-for-sale debt securities and certain other intercompany transactions.
Product cost exposures are primarily generated through non-functional currency denominated product purchases and the foreign currency adjustment program described below. NIKE entities primarily purchase products in two ways: (1) Certain NIKE entities purchase product from the NIKE Trading Company (“NTC”), a wholly owned sourcing hub that buys NIKE branded products from third party factories, predominantly in U.S. Dollars. The NTC, whose functional currency is the U.S. Dollar, then sells the product to NIKE entities in their respective functional currencies. When the NTC sells to a NIKE entity with a different functional currency, the result is a foreign currency exposure for the NTC. (2) Other NIKE entities purchase product directly from third party factories in U.S. Dollars. These purchases generate a foreign currency exposure for those NIKE entities with a functional currency other than the U.S. Dollar.
The Company operates a foreign currency adjustment program with certain factories. The program is designed to more effectively manage foreign currency risk by assuming certain of the factories’ foreign currency exposures, some of which are natural offsets to the Company's existing foreign currency exposures. Under this program, the Company’s payments to these factories are adjusted for rate fluctuations in the basket of currencies (“factory currency exposure index”) in which the labor, materials and overhead costs incurred by the factories in the production of NIKE branded products (“factory input costs”) are denominated. For the portion of the indices denominated in the local or functional currency of the factory, the Company may elect to place formally designated cash flow hedges. For all currencies within the indices, excluding the U.S. Dollar and the local or functional currency of the factory, an embedded derivative contract is created upon the factory’s acceptance of NIKE’s purchase order. Embedded derivative contracts are separated from the related purchase order, as further described within the Embedded Derivatives section below.
The Company’s policy permits the utilization of derivatives to reduce its foreign currency exposures where internal netting or other strategies cannot be effectively employed. Typically, the Company may enter into hedge contracts starting up to 12 to 24 months in advance of the forecasted transaction and may place incremental hedges up to 100% of the exposure by the time the forecasted transaction occurs. The total notional amount of outstanding foreign currency derivatives designated as cash flow hedges was $11.5 billion as of May 31, 2016.
As of May 31, 2016, the Company had a series of forward-starting interest rate swap agreements with a total outstanding notional amount of $1.5 billion. These instruments were designated as cash flow hedges of the variability in the expected cash outflows of interest payments on future debt due to changes in benchmark interest rates. During the second quarter of fiscal 2016, the Company terminated certain forward-starting interest rate swaps with a total notional amount of $1 billion in connection with the October 29, 2015 debt issuance (refer to Note 8 — Long-Term Debt). Upon termination of these forward-starting swaps, the Company received a cash payment from the related counterparties of $34 million, which was recorded in Accumulated other comprehensive income and will be released through Interest expense (income), net as interest payments are made over the term of the issued debt.
All changes in fair value of derivatives designated as cash flow hedges, excluding any ineffective portion, are recorded in Accumulated other comprehensive income until Net income is affected by the variability of cash flows of the hedged transaction. In most cases, amounts recorded in Accumulated other comprehensive income will be released to Net income in periods following the maturity of the related derivative, rather than at maturity. Effective hedge results are classified within the Consolidated Statements of Income in the same manner as the underlying exposure. The results of hedges of non-functional currency denominated revenues and product cost exposures, excluding embedded derivatives, are recorded in Revenues or Cost of sales when the underlying hedged transaction affects consolidated Net income. Results of hedges of selling and administrative expense are recorded together with those costs when the related expense is recorded. Amounts recorded in Accumulated other comprehensive income related to forward-starting interest rate swaps will be released through Interest expense (income), net as interest payments are made over the term of the issued debt. Results of hedges of anticipated purchases and sales of U.S. Dollar-denominated available-for-sale securities are recorded in Other (income) expense, net when the securities are sold. Results of hedges of certain anticipated intercompany transactions are recorded in Other (income) expense, net when the transaction occurs. The Company classifies the cash flows at settlement from these designated cash flow hedge derivatives in the same category as the cash flows from the related hedged items, primarily within the Cash provided by operations component of the Consolidated Statements of Cash Flows.
Premiums paid or received on options are initially recorded as deferred charges or deferred credits, respectively. The Company assesses the effectiveness of options based on the total cash flows method and records total changes in the options’ fair value to Accumulated other comprehensive income to the degree they are effective.
The Company formally assesses, both at a hedge’s inception and on an ongoing basis, whether the derivatives that are used in the hedging transaction have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. Effectiveness for cash flow hedges is assessed based on changes in forward rates. Ineffectiveness was 0 billion for the years ended May 31, 2016, 2015 and 2014.
The Company discontinues hedge accounting prospectively when: (1) it determines that the derivative is no longer highly effective in offsetting changes in the cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated or exercised; (3) it is no longer probable that the forecasted transaction will occur; or (4) management determines that designating the derivative as a hedging instrument is no longer appropriate.
When the Company discontinues hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period, but is expected to occur within an additional two-month period of time thereafter, the gain or loss on the derivative remains in Accumulated other comprehensive income and is reclassified to Net income when the forecasted transaction affects consolidated Net income. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses that were in Accumulated other comprehensive income will be recognized immediately in Other (income) expense, net. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the Company will carry the derivative at its fair value on the Consolidated Balance Sheets, recognizing future changes in the fair value in Other (income) expense, net. For the years ended May 31, 2016, 2015 and 2014, the amounts recorded in Other (income) expense, net as a result of the discontinuance of cash flow hedging because the forecasted transaction was no longer probable of occurring were immaterial.
As of May 31, 2016, $460 million of deferred net gains (net of tax) on both outstanding and matured derivatives in Accumulated other comprehensive income are expected to be reclassified to Net income during the next 12 months concurrent with the underlying hedged transactions also being recorded in Net income. Actual amounts ultimately reclassified to Net income are dependent on the exchange rates in effect when derivative contracts that are currently outstanding mature. As of May 31, 2016, the maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted transactions was 24 months.
Fair Value Hedges
The Company is also exposed to the risk of changes in the fair value of certain fixed-rate debt attributable to changes in interest rates. Derivatives used by the Company to hedge this risk are receive-fixed, pay-variable interest rate swaps. All interest rate swaps designated as fair value hedges of the related long-term debt meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt. The cash flows associated with the Company’s fair value hedges are periodic interest payments while the swaps are outstanding, which are reflected within the Cash provided by operations component of the Consolidated Statements of Cash Flows. The Company recorded no ineffectiveness from its interest rate swaps designated as fair value hedges for the years ended May 31, 2016, 2015 or 2014. On October 15, 2015, the Company repaid the long-term debt which had previously been hedged with these interest rate swaps. Accordingly, as of May 31, 2016, the Company had no interest rate swaps designated as fair value hedges.
Net Investment Hedges
The Company has, in the past, hedged and may, in the future, hedge the risk of variability in foreign-currency-denominated net investments in wholly-owned international operations. All changes in fair value of the derivatives designated as net investment hedges, except ineffective portions, are reported in Accumulated other comprehensive income along with the foreign currency translation adjustments on those investments. The Company classifies the cash flows at settlement of its net investment hedges within the Cash used by investing activities component of the Consolidated Statements of Cash Flows. The Company assesses hedge effectiveness based on changes in forward rates. The Company recorded no ineffectiveness from net investment hedges for the years ended May 31, 2016, 2015 or 2014. The Company had no outstanding net investment hedges as of May 31, 2016.
Undesignated Derivative Instruments
The Company may elect to enter into foreign exchange forwards to mitigate the change in fair value of specific assets and liabilities on the balance sheet and/or the embedded derivative contracts. These forwards are not designated as hedging instruments under the accounting standards for derivatives and hedging. Accordingly, these undesignated instruments are recorded at fair value as a derivative asset or liability on the Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net, together with the re-measurement gain or loss from the hedged balance sheet position or embedded derivative contract. The Company classifies the cash flows at settlement from undesignated instruments in the same category as the cash flows from the related hedged items, primarily within the Cash provided by operations component of the Consolidated Statements of Cash Flows. The total notional amount of outstanding undesignated derivative instruments was $7.1 billion as of May 31, 2016.
Embedded Derivatives
As part of the foreign currency adjustment program described above, an embedded derivative contract is created upon the factory’s acceptance of NIKE’s purchase order for currencies within the factory currency exposure indices that are neither the U.S. Dollar nor the local or functional currency of the factory. Embedded derivative contracts are treated as foreign currency forward contracts that are bifurcated from the related purchase order and recorded at fair value as a derivative asset or liability on the Consolidated Balance Sheets with their corresponding change in fair value recognized in Other (income) expense, net, from the date a purchase order is accepted by a factory through the date the purchase price is no longer subject to foreign currency fluctuations.
In addition, the Company has entered into certain other contractual agreements which have payments that are indexed to currencies that are not the functional currency of either substantial party to the contracts. These payment terms expose NIKE to variability in foreign exchange rates and create embedded derivative contracts that must be bifurcated from the related contract and recorded at fair value as derivative assets or liabilities on the Consolidated Balance Sheets with their corresponding changes in fair value recognized in Other (income) expense, net until each payment is settled.
At May 31, 2016, the notional amount of all embedded derivatives outstanding was approximately $282 million.
Credit Risk
The Company is exposed to credit-related losses in the event of nonperformance by counterparties to hedging instruments. The counterparties to all derivative transactions are major financial institutions with investment grade credit ratings. However, this does not eliminate the Company’s exposure to credit risk with these institutions. This credit risk is limited to the unrealized gains in such contracts should any of these counterparties fail to perform as contracted. To manage this risk, the Company has established strict counterparty credit guidelines that are continually monitored.
The Company’s derivative contracts contain credit risk related contingent features designed to protect against significant deterioration in counterparties’ creditworthiness and their ultimate ability to settle outstanding derivative contracts in the normal course of business. The Company’s bilateral credit related contingent features generally require the owing entity, either the Company or the derivative counterparty, to post collateral for the portion of the fair value in excess of $50 million should the fair value of outstanding derivatives per counterparty be greater than $50 million. Additionally, a certain level of decline in credit rating of either the Company or the counterparty could also trigger collateral requirements. As of May 31, 2016, the Company was in compliance with all credit risk-related contingent features and had derivative instruments with credit risk-related contingent features in a net liability position of $3 million. Accordingly, the Company was not required to post any collateral as a result of these contingent features. Further, as of May 31, 2016, the Company had received $105 million of cash collateral from various counterparties to its derivative contracts (refer to Note 6 — Fair Value Measurements). Given the considerations described above, the Company considers the impact of the risk of counterparty default to be immaterial.
SCHEDULE II - Valuation and qualifying accounts
SCHEDULE II - Valuation and qualifying accounts
SCHEDULE II — Valuation and Qualifying Accounts
(In millions)
 
Balance at
Beginning of Period
 
Charged to Costs
and Expenses
 
Charged to Other Accounts(1)
 
Write-Offs, Net
 
Balance at End
of Period
Sales returns reserve
 
 
 
 
 
 
 
 
 

For the year ended May 31, 2014
 
$
241

 
$
619

 
$
(3
)
 
$
(549
)
 
$
308

For the year ended May 31, 2015
 
308

 
726

 
(35
)
 
(620
)
 
379

For the year ended May 31, 2016
 
379

 
788

 
(15
)
 
(708
)
 
444

Allowance for doubtful accounts(2)
 
 
 
 
 
 
 
 
 
 
For the year ended May 31, 2014
 
$
104

 
$
13

 
$
(2
)
 
$
(37
)
 
$
78

For the year ended May 31, 2015
 
78

 
35

 
(15
)
 
(20
)
 
78

For the year ended May 31, 2016
 
78

 
52

 
(2
)
 
(85
)
 
43

(1)
Amounts included in this column primarily relate to foreign currency translation.
(2)
Includes both current and non-current portions of the allowance for doubtful accounts. The non-current portion is included in Deferred income taxes and other assets on the Consolidated Balance Sheets.
Summary of Significant Accounting Policies (Policies)
Basis of Consolidation 
Basis of Consolidation
The Consolidated Financial Statements include the accounts of NIKE, Inc. and its subsidiaries (the “Company”). All significant intercompany transactions and balances have been eliminated.
On November 19, 2015, the Company announced a two-for-one split of both NIKE Class A and Class B Common Stock. The stock split was in the form of a 100 percent stock dividend payable on December 23, 2015 to shareholders of record at the close of business on December 9, 2015. Common stock began trading at the split-adjusted price on December 24, 2015. All share and per share amounts presented reflect the stock split.
Reclassifications 
Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal 2016 presentation.
Revenue Recognition 
Revenue Recognition
Wholesale revenues are recognized when title and the risks and rewards of ownership have passed to the customer, based on the terms of sale. This occurs 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 and online store revenues are recorded upon delivery to the customer. Provisions for post-invoice sales discounts, returns and miscellaneous claims from customers are estimated and recorded as a reduction to revenue at the time of sale. Post-invoice sales discounts consist of contractual programs with certain customers or discretionary discounts that are expected to be granted to certain customers at a later date. Estimates of discretionary discounts, returns and claims are based on (1) historical rates, (2) specific identification of outstanding claims and outstanding returns not yet received from customers and (3) estimated discounts, returns and claims expected, but not yet finalized with customers.
Cost of Sales 
Cost of Sales
Cost of sales consists primarily of inventory costs, as well as warehousing costs (including the cost of warehouse labor), third-party royalties, certain foreign currency hedge gains and losses and research, design and development costs. Outbound shipping and handling costs are expensed as incurred and included in Cost of sales
Operating Overhead Expense 
Operating Overhead Expense
Operating overhead expense consists primarily of payroll and benefit related costs, rent, depreciation and amortization, professional services and meetings and travel.
Demand Creation Expense 
Demand Creation Expense
Demand creation expense consists of advertising and promotion costs, including costs of endorsement contracts, television, digital and print advertising, brand events and retail brand presentation. Advertising production costs are expensed the first time an advertisement is run. Advertising communication costs are expensed when the advertisement appears. Costs related to brand events are expensed when the event occurs. Costs related to retail brand presentation are expensed when the presentation is completed and delivered.
A significant amount of the Company’s promotional expenses result from payments under endorsement contracts. Accounting for endorsement payments is based upon specific contract provisions. Generally, endorsement payments are expensed on a straight-line basis 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 and other current assets or Deferred income taxes and other assets depending on the period to which the prepayment applies.
Certain contracts provide for contingent payments to endorsers based upon specific achievements in their sports (e.g., winning a championship). The Company records demand creation expense for these amounts when the endorser achieves the specific goal.
Certain contracts provide for variable payments based upon endorsers maintaining a level of performance in their sport over an extended period of time (e.g., maintaining a specified ranking in a sport for a year). When the Company determines payments are probable, the amounts are reported in Demand creation expense ratably over the contract period based on our best estimate of the endorser's performance. In these instances, to the extent that actual payments to the endorser differ from the Company's estimate due to changes in the endorser’s performance, increased or decreased demand creation expense may be recorded in a future period.
Certain contracts provide for royalty payments to endorsers based upon a predetermined percent of sales of particular products. The Company expenses these payments in Cost of sales as the related sales occur. In certain contracts, the Company offers minimum guaranteed royalty payments. For contracts for which the Company estimates it will not meet the minimum guaranteed amount of royalty fees through sales of product, the Company records the amount of the guaranteed payment in excess of that earned through sales of product in Demand creation expense uniformly over the contract term.
Through cooperative advertising programs, the Company reimburses retail customers for certain costs of advertising the Company’s products. The Company records these costs in Demand creation expense at the point in time when it is obligated to its customers for the costs. This obligation may arise prior to the related advertisement being run.
Cash and Equivalents 
Cash and Equivalents
Cash and equivalents represent cash and short-term, highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, money market funds, time deposits and corporate debt securities with maturities of 90 days or less at the date of purchase.
Short-Term Investments 
Short-Term Investments
Short-term investments consist of highly liquid investments, including commercial paper, U.S. Treasury, U.S. Agency, time deposits and corporate debt securities, with maturities over 90 days at the date of purchase. Debt securities that the Company has the ability and positive intent to hold to maturity are carried at amortized cost. At May 31, 2016 and 2015, the Company did not hold any short-term investments that were classified as trading or held-to-maturity.
At May 31, 2016 and 2015, Short-term investments consisted of available-for-sale securities. Available-for-sale securities are recorded at fair value with unrealized gains and losses reported, net of tax, in Accumulated other comprehensive income, unless unrealized losses are determined to be other than temporary. Realized gains and losses on the sale of securities are determined by specific identification. The Company considers all available-for-sale securities, including those with maturity dates beyond 12 months, as available to support current operational liquidity needs and therefore classifies all securities with maturity dates beyond 90 days at the date of purchase as current assets within Short-term investments on the Consolidated Balance Sheets.
Allowance for Uncollectible Accounts Receivable 
Allowance for Uncollectible Accounts Receivable
Accounts receivable, net consist primarily of amounts receivable from customers. The Company makes ongoing estimates relating to the collectability of its accounts receivable and maintains an allowance for estimated losses resulting from the inability of its customers to make required payments. In determining the amount of the allowance, the Company considers historical levels of credit losses and makes judgments about the creditworthiness of significant customers based on ongoing credit evaluations. Accounts receivable with anticipated collection dates greater than 12 months from the balance sheet date and related allowances are considered non-current and recorded in Deferred income taxes and other assets.
Inventory Valuation 
Inventory Valuation
Inventories are stated at lower of cost or market and valued on either an average or specific identification cost basis. For inventories in transit that represent direct shipments to customers, the related inventory and cost of sales are recognized on a specific identification basis. Inventory costs primarily consist of product cost from the Company's suppliers, as well as inbound freight, import duties, taxes, insurance and logistics and other handling fees.
Property, Plant and Equipment and Depreciation 
Property, Plant and Equipment and Depreciation
Property, plant and equipment are recorded at cost. Depreciation is determined on a straight-line basis for buildings and leasehold improvements over 2 to 40 years and for machinery and equipment over 2 to 15 years.
Depreciation and amortization of assets used in manufacturing, warehousing and product distribution are recorded in Cost of sales. Depreciation and amortization of other assets are recorded in Operating overhead expense.
Software Development Costs 
Software Development Costs
Internal Use Software: Expenditures for major software purchases and software developed for internal use are capitalized and amortized over a 2 to 10 year period on a straight-line basis. The Company’s policy provides for the capitalization of external direct costs of materials and services associated with developing or obtaining internal use computer software. In addition, the Company also capitalizes certain payroll and payroll-related costs for employees who are directly associated with internal use computer software projects. The amount of capitalizable payroll costs with respect to these employees is limited to the time directly spent on such projects. Costs associated with preliminary project stage activities, training, maintenance and all other post-implementation stage activities are expensed as incurred.
Computer Software to be Sold, Leased or Otherwise Marketed 
Computer Software to be Sold, Leased or Otherwise Marketed: Development costs of computer software to be sold, leased or otherwise marketed as an integral part of a product are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Therefore, software development costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally most software development costs have been expensed as incurred.
Impairment of Long-Lived Assets 
Impairment of Long-Lived Assets
The Company reviews the carrying value of long-lived assets or asset groups to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, the Company would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, the Company will estimate the fair value of the asset group using appropriate valuation methodologies, which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset group’s carrying amount and its estimated fair value.
Goodwill and Indefinite-Lived Intangible Assets 
Goodwill and Indefinite-Lived Intangible Assets
The Company performs annual impairment tests on goodwill and intangible assets with indefinite lives in the fourth quarter of each fiscal year or when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit or an intangible asset with an indefinite life below its carrying value. Events or changes in circumstances that may trigger interim impairment reviews include significant changes in business climate, operating results, planned investments in the reporting unit, planned divestitures or an expectation that the carrying amount may not be recoverable, among other factors. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the two-step impairment test is unnecessary. The two-step impairment test first requires the Company to estimate the fair value of its reporting units. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and the Company proceeds to step two of the impairment analysis. In step two of the analysis, the Company measures and records an impairment loss equal to the excess of the carrying value of the reporting unit's goodwill over its implied fair value, if any.
The Company generally bases its measurement of the fair value of a reporting unit on a blended analysis of the present value of future discounted cash flows and the market valuation approach. The discounted cash flows model indicates the fair value of the reporting unit based on the present value of the cash flows that the Company expects the reporting unit to generate in the future. The Company's significant estimates in the discounted cash flows model include: its weighted average cost of capital; long-term rate of growth and profitability of the reporting unit's business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the reporting unit to comparable publicly traded companies in similar lines of business. Significant estimates in the market valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting unit.
Indefinite-lived intangible assets primarily consist of acquired trade names and trademarks. The Company may first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the indefinite-lived intangible asset is not impaired, no quantitative fair value measurement is necessary. If a quantitative fair value measurement calculation is required for these intangible assets, the Company utilizes the relief-from-royalty method. This method assumes that trade names and trademarks have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires the Company to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted average cost of capital.
Operating Leases 
Operating Leases
The Company leases retail store space, certain distribution and warehouse facilities, office space and other non-real estate assets under operating leases. Operating lease agreements may contain rent escalation clauses, renewal options, rent holidays or certain landlord incentives, including tenant improvement allowances. Rent expense for non-cancelable operating leases with scheduled rent increases or landlord incentives are recognized on a straight-line basis over the lease term, beginning with the effective lease commencement date, which is generally the date in which the Company takes possession of or controls the physical use of the property. Certain leases also provide for contingent rent, which is determined as a percent of sales in excess of specified levels. A contingent rent liability is recognized together with the corresponding rent expense when specified levels have been achieved or when the Company determines that achieving the specified levels during the period is probable.
Fair Value Measurements 
Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivatives and available-for-sale securities. Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company uses a three-level hierarchy established by the Financial Accounting Standards Board ("FASB") that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach and cost approach).
The levels of hierarchy are described below:
•
Level 1: Quoted prices in active markets for identical assets or liabilities.
•
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3: Unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement.
Pricing vendors are utilized for certain Level 1 and Level 2 investments. These vendors either provide a quoted market price in an active market or use observable inputs without applying significant adjustments in their pricing. Observable inputs include broker quotes, interest rates and yield curves observable at commonly quoted intervals, volatilities and credit risks. The fair value of derivative contracts is determined using observable market inputs such as the daily market foreign currency rates, forward pricing curves, currency volatilities, currency correlations and interest rates and considers nonperformance risk of the Company and that of its counterparties.
The Company’s fair value processes include controls that are designed to ensure appropriate fair values are recorded. These controls include a comparison of fair values to another independent pricing vendor.
Foreign Currency Translation and Foreign Currency Transactions 
Foreign Currency Translation and Foreign Currency Transactions
Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of Accumulated other comprehensive income in Total shareholders’ equity.
The Company’s global subsidiaries have various assets and liabilities, primarily receivables and payables, which are denominated in currencies other than their functional currency. These balance sheet items are subject to re-measurement, the impact of which is recorded in Other (income) expense, net, within the Consolidated Statements of Income.
Accounting for Derivatives and Hedging Activities 
Accounting for Derivatives and Hedging Activities
The Company uses derivative financial instruments to reduce its exposure to changes in foreign currency exchange rates and interest rates. All derivatives are recorded at fair value on the Consolidated Balance Sheets and changes in the fair value of derivative financial instruments are either recognized in Accumulated other comprehensive income (a component of Total shareholders’ equity), Long-term debt or Net income depending on the nature of the underlying exposure, whether the derivative is formally designated as a hedge and, if designated, the extent to which the hedge is effective. The Company classifies the cash flows at settlement from derivatives in the same category as the cash flows from the related hedged items. For undesignated hedges and designated cash flow hedges, this is primarily within the Cash provided by operations component of the Consolidated Statements of Cash Flows. For designated net investment hedges, this is within the Cash used by investing activities component of the Consolidated Statements of Cash Flows. For the Company’s fair value hedges, which are interest rate swaps used to mitigate the change in fair value of its fixed-rate debt attributable to changes in interest rates, the related cash flows from periodic interest payments are reflected within the Cash provided by operations component of the Consolidated Statements of Cash Flows.
When the Company discontinues hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period, but is expected to occur within an additional two-month period of time thereafter, the gain or loss on the derivative remains in Accumulated other comprehensive income and is reclassified to Net income when the forecasted transaction affects consolidated Net income. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses that were in Accumulated other comprehensive income will be recognized immediately in Other (income) expense, net.
Stock-Based Compensation 
Stock-Based Compensation
The Company estimates the fair value of options and stock appreciation rights granted under the NIKE, Inc. Stock Incentive Plan and employees’ purchase rights under the Employee Stock Purchase Plans (“ESPPs”) using the Black-Scholes option pricing model. The Company recognizes this fair value, net of estimated forfeitures, as Operating overhead expense in the Consolidated Statements of Income over the vesting period using the straight-line method.
Income Taxes 
Income Taxes
The Company 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. The Company records a valuation allowance to reduce deferred tax assets to the amount management believes is more likely than not to be realized. United States income taxes are provided currently on financial statement earnings of non-U.S. subsidiaries that are expected to be repatriated. The Company determines annually the amount of undistributed non-U.S. earnings to invest indefinitely in its non-U.S. operations.
The Company recognizes a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not that the position will be sustained upon examination by relevant tax authorities. The Company recognizes interest and penalties related to income tax matters in Income tax expense.
Earnings Per Share 
Earnings Per Share
Basic earnings per common share is calculated by dividing Net income by the weighted average number of common shares outstanding during the year. Diluted earnings per common share is calculated by adjusting weighted average outstanding shares, assuming conversion of all potentially dilutive stock options and awards.
Refer to Note 12 — Earnings Per Share for further discussion.
Management Estimates 
Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates, including estimates relating to assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Recently Adopted and Recently Issued Accounting Standards 
Recently Adopted Accounting Standards
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes to simplify the presentation of deferred taxes in the statement of financial position. The updated guidance requires that deferred tax assets and liabilities be classified as non-current in a classified balance sheet. The Company elected to early adopt ASU 2015-17 on a retrospective basis in the fourth quarter of fiscal 2016. The adoption of this standard reduced Total current assets by $389 million, increased Deferred income taxes and other assets by $386 million and reduced Total current liabilities and Deferred income taxes and other liabilities by $2 million and $1 million, respectively, on the Consolidated Balance Sheet as of May 31, 2015.
Recently Issued Accounting Standards
In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standards update that replaces existing revenue recognition guidance. 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. In addition, the new standard requires that reporting companies disclose the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Based on the FASB's decision in July 2015 to defer the effective date and to allow more flexibility with implementation, the new standard will be effective for the Company beginning June 1, 2018, with early application permitted. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. The Company has not yet selected a transition method and is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for the Company beginning June 1, 2018. The Company does not expect the adoption to have a material impact on the Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. The standard is effective for the Company beginning June 1, 2019, with early application permitted. The new standard is required to be applied with a modified retrospective approach to each prior reporting period presented with optional practical expedients. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
In March 2016, the FASB Issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The updated guidance changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. The update to the standard is effective for the Company beginning June 1, 2017, with early application permitted. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.
Property, Plant and Equipment (Tables)
Schedule of Property, Plant and Equipment
Property, plant and equipment, net included the following:
 
 
As of May 31,
(In millions)
 
2016
 
2015
Land
 
$
286

 
$
273

Buildings
 
1,467

 
1,250

Machinery, equipment and internal-use software
 
3,510

 
3,329

Leasehold improvements
 
1,338

 
1,150

Construction in process
 
437

 
350

Total property, plant and equipment, gross
 
7,038

 
6,352

Less accumulated depreciation
 
3,518

 
3,341

TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
 
$
3,520

 
$
3,011

Accrued Liabilities (Tables)
Schedule of Accrued Liabilities
Accrued liabilities included the following:
 
 
As of May 31,
(In millions)
 
2016
 
2015
Compensation and benefits, excluding taxes
 
$
943

 
$
997

Endorsement compensation
 
393

 
388

Dividends payable
 
271

 
240

Import and logistics costs
 
198

 
207

Fair value of derivatives
 
162

 
162

Taxes other than income taxes payable
 
159

 
172

Advertising and marketing
 
119

 
117

Collateral received from counterparties to hedging instruments
 
105

 
968

Other(1)
 
687

 
698

TOTAL ACCRUED LIABILITIES
 
$
3,037

 
$
3,949

(1)
Other consists of various accrued expenses with no individual item accounting for more than 5% of the total Accrued liabilities balance at May 31, 2016 and 2015.
Fair Value Measurements (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis 
The following tables present information about the Company's financial assets and liabilities measured at fair value on a recurring basis as of May 31, 2016 and 2015, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value. Refer to Note 1 — Summary of Significant Accounting Policies for additional detail regarding the Company’s fair value measurement methodology.
 
 
As of May 31, 2016
(In millions)
 
Assets at Fair Value
 
Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
774

 
$
774

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
1,265

 
100

 
1,165

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
831

 
827

 
4

 
—

U.S. Agency securities
 
679

 
—

 
679

 
—

Commercial paper and bonds
 
733

 
262

 
471

 
—

Money market funds
 
1,175

 
1,175

 
—

 
—

Total level 2
 
3,418

 
2,264

 
1,154

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
10

 
—

 
—

 
10

TOTAL
 
$
5,467

 
$
3,138

 
$
2,319

 
$
10

 
 
 
As of May 31, 2015
(In millions)
 
Assets at Fair Value
 
Cash Equivalents
 
Short-term Investments
 
Other Long-term Assets
Cash
 
$
615

 
$
615

 
$
—

 
$
—

Level 1:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
869

 
225

 
644

 
—

Level 2:
 
 
 
 
 
 
 
 
Time deposits
 
684

 
684

 
—

 
—

U.S. Agency securities
 
976

 
110

 
866

 
—

Commercial paper and bonds
 
914

 
352

 
562

 
—

Money market funds
 
1,866

 
1,866

 
—

 
—

Total level 2
 
4,440

 
3,012

 
1,428

 
—

Level 3:
 
 
 
 
 
 
 
 
Non-marketable preferred stock
 
8

 
—

 
—

 
8

TOTAL
 
$
5,932

 
$
3,852

 
$
2,072

 
$
8


Schedule of Derivative Instruments in Statement of Financial Position, Fair Value 
The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of May 31, 2016 and 2015, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
 
As of May 31, 2016
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
603

 
$
487

 
$
116

 
$
145

 
$
115

 
$
30

Embedded derivatives
 
7

 
2

 
5

 
9

 
2

 
7

Interest rate swaps(2)
 
7

 
7

 
—

 
45

 
45

 
—

TOTAL
 
$
617

 
$
496

 
$
121

 
$
199

 
$
162

 
$
37

(1)
If the foreign exchange derivative instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $136 million as of May 31, 2016. As of that date, the Company had received $105 million of cash collateral from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2016.
(2)
As of May 31, 2016, no amount of cash collateral had been received or posted on the derivative asset and liability balances related to the Company's interest rate swaps.
 
 
As of May 31, 2015
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
1,554

 
$
1,034

 
$
520

 
$
164

 
$
160

 
$
4

Embedded derivatives
 
7

 
2

 
5

 
11

 
2

 
9

Interest rate swaps(2)
 
78

 
78

 
—

 
—

 
—

 
—

TOTAL
 
$
1,639

 
$
1,114

 
$
525

 
$
175

 
$
162

 
$
13

(1)
If the foreign exchange derivative instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $161 million as of May 31, 2015. As of that date, the Company had received $900 million of cash collateral and $74 million of securities from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2015.
(2)
As of May 31, 2015, the Company had received $68 million of cash collateral related to its interest rate swap
The following table presents the fair values of derivative instruments included within the Consolidated Balance Sheets as of May 31, 2016 and 2015: 
 
 
Asset Derivatives
 
Liability Derivatives
(In millions)
 
Balance Sheet
Location
 
2016
 
2015
 
Balance Sheet 
Location
 
2016
 
2015
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
447

 
$
825

 
Accrued liabilities
 
$
38

 
$
140

Interest rate swaps
 
Prepaid expenses and other current assets
 
7

 
78

 
Accrued liabilities
 
45

 
—

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
90

 
520

 
Deferred income taxes and other liabilities
 
12

 
4

Interest rate swaps
 
Deferred income taxes and other assets
 
—

 
—

 
Deferred income taxes and other liabilities
 
—

 
—

Total derivatives formally designated as hedging instruments
 
 
 
544

 
1,423

 
 
 
95

 
144

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
40

 
209

 
Accrued liabilities
 
76

 
20

Embedded derivatives
 
Prepaid expenses and other current assets
 
2

 
2

 
Accrued liabilities
 
2

 
2

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
26

 
—

 
Deferred income taxes and other liabilities
 
19

 
—

Embedded derivatives
 
Deferred income taxes and other assets
 
5

 
5

 
Deferred income taxes and other liabilities
 
7

 
9

Total derivatives not designated as hedging instruments
 
 
 
73

 
216

 
 
 
104

 
31

TOTAL DERIVATIVES
 
 
 
$
617

 
$
1,639

 
 
 
$
199

 
$
175

Short-Term Borrowings and Credit Lines (Tables)
Schedule of Short-term Debt
Notes payable and interest-bearing accounts payable to Sojitz Corporation of America (“Sojitz America”) as of May 31, 2016 and 2015 are summarized below:
 
 
As of May 31,
 
 
 
2016
 
2015
(Dollars in millions)
 
Borrowings

 
Interest Rate
 
Borrowings

 
Interest Rate
Notes payable:
 
 
 
 
 
 
 
 
 
 
U.S. operations
 
$
—

 
0.00
%
(1) 
 
$
—

 
0.00
%
(1) 
Non-U.S. operations
 
1

 
13.00
%
(1) 
 
74

 
12.39
%
(1) 
TOTAL NOTES PAYABLE
 
$
1

 
 
 
 
$
74

 
 
 
Interest-bearing accounts payable:
 
 
 
 
 
 
 
 
 
 
Sojitz America
 
$
39

 
1.27
%
 
 
$
78

 
0.98
%
 
(1)
Weighted average interest rate includes non-interest bearing overdrafts.
Long-Term Debt (Tables)
Schedule of Long-term Debt Instruments
Long-term debt, net of unamortized premiums and discounts and swap fair value adjustments, comprises the following: 
 
 
 
 
 
 
 
 
Book Value Outstanding
As of May 31,
Scheduled Maturity (Dollars and Yen in millions)
 
Original
Principal
 
Interest
Rate
 
Interest
Payments
 
2016
 
2015
Corporate Bond Payables:(1)
 
 
 
 
 
 
 
 
 
 
October 15, 2015(2)
 
$
100

 
5.15
%
 
Semi-Annually
 
$
—

 
$
101

May 1, 2023(3)
 
$
500

 
2.25
%
 
Semi-Annually
 
499

 
499

May 1, 2043(3)
 
$
500

 
3.63
%
 
Semi-Annually
 
499

 
499

November 1, 2045(4)
 
$
1,000

 
3.88
%
 
Semi-Annually
 
991

 
—

Promissory Notes:
 
 
 
 
 
 
 
 
 
 
April 1, 2017(5)
 
$
40

 
6.20
%
 
Monthly
 
38

 
39

January 1, 2018(5)
 
$
19

 
6.79
%
 
Monthly
 
—

 
19

Japanese Yen Notes:
 
 
 
 
 
 
 
 
 
 
August 20, 2001 through November 20, 2020(6)
 
¥
9,000

 
2.60
%
 
Quarterly
 
18

 
20

August 20, 2001 through November 20, 2020(6)
 
¥
4,000

 
2.00
%
 
Quarterly
 
9

 
9

Total
 
 
 
 
 
 
 
2,054

 
1,186

Less current maturities
 
 

 
 

 
 
 
44

 
107

TOTAL LONG-TERM DEBT
 
 
 
 
 
 
 
$
2,010

 
$
1,079

(1)
These senior unsecured obligations rank equally with the Company's other unsecured and unsubordinated indebtedness.
(2)
The Company has entered into interest rate swap agreements whereby the Company receives fixed interest payments at the same rate as the note and pays variable interest payments based on the six-month LIBOR plus a spread. The swaps have the same notional amount and maturity date as the corresponding note. On October 15, 2015, the Company repaid the long-term debt which had previously been hedged with these interest rate swaps. Accordingly, as of May 31, 2016, the Company had no interest rate swaps designated as fair value hedges.
(3)
The bonds are redeemable at the Company's option prior to February 1, 2023 and November 1, 2042, respectively, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to February 1, 2023 and November 1, 2042, respectively, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest.
(4)
The bonds are redeemable at the Company's option prior to May 1, 2045, at a price equal to the greater of (i) 100% of the aggregate principal amount of the notes to be redeemed or (ii) the sum of the present values of the remaining scheduled payments, plus in each case, accrued and unpaid interest. Subsequent to May 1, 2045, the bonds also feature a par call provision, which allows for the bonds to be redeemed at a price equal to 100% of the aggregate principal amount of the notes being redeemed, plus accrued and unpaid interest.
(5)
The Company assumed a total of $59 million in bonds payable as part of its agreement to purchase certain Corporate properties; this was treated as a non-cash financing transaction. The property serves as collateral for the debt. The purchase of these properties was accounted for as a business combination where the total consideration of $85 million was allocated to the land and buildings acquired; no other tangible or intangible assets or liabilities resulted from the purchase. The bonds mature in 2017 and 2018 and the Company does not have the ability to re-negotiate the terms of the debt agreements and would incur significant financial penalties if the notes were paid-off prior to maturity. During the year ended May 31, 2016, the notes due January 1, 2018 were legally defeased and an insignificant loss on defeasance was recognized.
(6)
NIKE Logistics YK assumed a total of ¥13.0 billion in loans as part of its agreement to purchase a distribution center in Japan, which serves as collateral for the loans. These loans mature in equal quarterly installments during the period August 20, 2001 through November 20, 2020.
Income Taxes (Tables)
Schedule of Income before Income Tax, Domestic and Foreign 
Income before income taxes is as follows:
 
 
Year Ended May 31,
(In millions)
 
2016
 
2015
 
2014
Income before income taxes:
 
 
 
 
 
 
United States
 
$
956

 
$
1,967

 
$
3,066

Foreign
 
3,667

 
2,238

 
478

TOTAL INCOME BEFORE INCOME TAXES
 
$
4,623

 
$
4,205

 
$
3,544

Schedule of Components of Income Tax Expense (Benefit) 
The provision for income taxes is as follows:
 
 
Year Ended May 31,
(In millions)
 
2016
 
2015
 
2014
Current:
 
 
 
 
 
 
United States
 
 
 
 
 
 
Federal
 
$
304

 
$
596

 
$
259

State
 
71

 
80

 
104

Foreign
 
568

 
369

 
499

Total
 
943

 
1,045

 
862

Deferred:
 
 
 
 
 
 
United States
 
 
 
 
 
 
Federal
 
(57
)
 
(66
)
 
19

State
 
(16
)
 
(11
)
 
(3
)
Foreign
 
(7
)
 
(36
)
 
(27
)
Total
 
(80
)
 
(113
)
 
(11
)
TOTAL INCOME TAX EXPENSE
 
$
863

 
$
932

 
$
851


Schedule of Effective Income Tax Rate Reconciliation 
A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:
 
 
Year Ended May 31,
  
 
2016
 
2015
 
2014
Federal income tax rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
State taxes, net of federal benefit
 
1.1
 %
 
0.9
 %
 
1.8
 %
Foreign earnings
 
-18.6
 %
 
-15.7
 %
 
2.2
 %
Deferred charge
 
0.4
 %
 
0.9
 %
 
-14.6
 %
Other, net
 
0.8
 %
 
1.1
 %
 
-0.4
 %
EFFECTIVE INCOME TAX RATE
 
18.7
 %
 
22.2
 %
 
24.0
 %
Schedule of Deferred Tax Assets and Liabilities 
Deferred tax assets and liabilities comprise the following: 
 
 
As of May 31,
(In millions)
 
2016
 
2015
Deferred tax assets:
 
 
 
 
Allowance for doubtful accounts
 
$
5

 
$
11

Inventories
 
88

 
59

Sales return reserves
 
182

 
143

Deferred compensation
 
274

 
258

Stock-based compensation
 
206

 
179

Reserves and accrued liabilities
 
78

 
92

Net operating loss carry-forwards
 
44

 
10

Undistributed earnings of foreign subsidiaries
 
179

 
149

Other
 
72

 
76

Total deferred tax assets
 
1,128

 
977

Valuation allowance
 
(52
)
 
(9
)
Total deferred tax assets after valuation allowance
 
1,076

 
968

Deferred tax liabilities:
 
 
 
 
Property, plant and equipment
 
(268
)
 
(220
)
Intangibles
 
(92
)
 
(93
)
Other
 
(4
)
 
(38
)
Total deferred tax liability
 
(364
)
 
(351
)
NET DEFERRED TAX ASSET
 
$
712

 
$
617

Unrecognized Tax Benefits Reconciliation 
The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits:
 
 
As of May 31,
(In millions)
 
2016
 
2015
 
2014
Unrecognized tax benefits, beginning of the period
 
$
438

 
$
506

 
$
447

Gross increases related to prior period tax positions(1)
 
49

 
32

 
814

Gross decreases related to prior period tax positions(1)
 
(20
)
 
(123
)
 
(166
)
Gross increases related to current period tax positions
 
81

 
82

 
125

Gross decreases related to current period tax positions
 
—

 
(9
)
 
(30
)
Settlements(1)
 
(13
)
 
(27
)
 
(676
)
Lapse of statute of limitations
 
(17
)
 
(10
)
 
(4
)
Changes due to currency translation
 
(12
)
 
(13
)
 
(4
)
UNRECOGNIZED TAX BENEFITS, END OF THE PERIOD
 
$
506

 
$
438

 
$
506


(1)
During the fourth quarter of the fiscal year ended May 31, 2014, the Company reached a resolution with the IRS on a U.S. Unilateral Advanced Pricing Agreement that covers intercompany transfer pricing for fiscal years 2011 through 2020. As a result, the Company recorded a gross increase in unrecognized tax benefits related to prior period tax positions, a gross decrease in unrecognized tax benefits related to prior period tax positions and a settlement. The net impact of these items resulted in a decrease to unrecognized tax benefits.
Summary of Operating Loss Carryforwards 
The Company has available domestic and foreign loss carry-forwards of $143 million at May 31, 2016. Such losses will expire as follows: 
 
 
Year Ending May 31,
(In millions)
 
2017
 
2018
 
2019
 
2020
 
2021-2035
 
Indefinite

 
Total

Net operating losses
 
$
1

 
$
4

 
$
1

 
$
1

 
$
35

 
$
101

 
$
143

Common Stock and Stock-Based Compensation (Tables)
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan 
The following table summarizes the Company’s total stock-based compensation expense recognized in Operating overhead expense: 
 
 
Year Ended May 31,
(In millions)
 
2016
 
2015
 
2014
Stock options(1)
 
$
171

 
$
136

 
$
125

ESPPs
 
31

 
24

 
22

Restricted stock
 
34

 
31

 
30

TOTAL STOCK-BASED COMPENSATION EXPENSE
 
$
236

 
$
191

 
$
177

(1)
Expense for stock options includes the expense associated with stock appreciation rights. Accelerated stock option expense is recorded for employees eligible for accelerated stock option vesting upon retirement. Accelerated stock option expense for the years ended May 31, 2016, 2015 and 2014 was $30 million, $19 million and $15 million, respectively.
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions 
The weighted average assumptions used to estimate these fair values are as follows:
 
 
Year Ended May 31,
  
 
2016
 
2015
 
2014
Dividend yield
 
1.0
%
 
1.2
%
 
1.3
%
Expected volatility
 
23.6
%
 
23.6
%
 
27.9
%
Weighted average expected life (in years)
 
5.8

 
5.8

 
5.3

Risk-free interest rate
 
1.7
%
 
1.7
%
 
1.3
%
Schedule of Share-based Compensation, Stock Options, Activity 
The following summarizes the stock option transactions under the plan discussed above: 
 
 
Shares(1)
 
Weighted Average
Option Price
  
 
(In millions)
 
  
Options outstanding May 31, 2013
 
135.3

 
$
17.36

Exercised
 
(22.0
)
 
14.15

Forfeited
 
(2.5
)
 
24.17

Granted
 
16.3

 
31.77

Options outstanding May 31, 2014
 
127.1

 
19.64

Exercised
 
(27.2
)
 
15.39

Forfeited
 
(2.1
)
 
29.51

Granted
 
18.4

 
38.84

Options outstanding May 31, 2015
 
116.2

 
23.50

Exercised
 
(22.5
)
 
17.75

Forfeited
 
(2.3
)
 
39.96

Granted
 
20.6

 
56.41

Options outstanding May 31, 2016
 
112.0

 
$
30.38

Options exercisable at May 31,
 
 
 
 
2014
 
74.0

 
$
15.71

2015
 
68.6

 
18.26

2016
 
66.5

 
21.48

(1)
Includes stock appreciation rights transactions.
Earnings Per Share (Tables)
Schedule of Earnings Per Share, Basic and Diluted
The following is a reconciliation from basic earnings per common share to diluted earnings per common share. The computations of diluted earnings per common share excluded options, including shares under employee stock purchase plans (“ESPPs”), to purchase an additional 0.2 million, 1.7 million and 1.5 million shares of common stock outstanding for the years ended May 31, 2016, 2015 and 2014, respectively, because the options were anti-dilutive.
 
 
Year Ended May 31,
(In millions, except per share data)
 
2016
 
2015
 
2014
Determination of shares:
 
 
 
 
 
 
Weighted average common shares outstanding
 
1,697.9

 
1,723.5

 
1,766.7

Assumed conversion of dilutive stock options and awards
 
44.6

 
45.3

 
44.9

DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
 
1,742.5

 
1,768.8

 
1,811.6

 
 
 
 
 
 
 
Earnings per common share:
 
 
 
 
 
 
Basic
 
$
2.21

 
$
1.90

 
$
1.52

Diluted
 
$
2.16

 
$
1.85

 
$
1.49

Accumulated Other Comprehensive Income (Tables)
Schedule of Accumulated Other Comprehensive Income 
The changes in Accumulated other comprehensive income, net of tax, were as follows:
(In millions)
 
Foreign Currency Translation Adjustment(1)(2)
 
Cash Flow Hedges
 
Net Investment Hedges(1)(2)
 
Other
 
Total
Balance at May 31, 2015
 
$
(31
)
 
$
1,220

 
$
115

 
$
(58
)
 
$
1,246

Other comprehensive gains (losses) before reclassifications(3)
 
(178
)
 
(47
)
 
—

 
6

 
(219
)
Reclassifications to net income of previously deferred (gains) losses(4)
 
2

 
(710
)
 
—

 
(1
)
 
(709
)
Other comprehensive income (loss)
 
(176
)
 
(757
)
 
—

 
5

 
(928
)
Balance at May 31, 2016
 
$
(207
)
 
$
463

 
$
115

 
$
(53
)
 
$
318

(1)
The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
(2)
Beginning balances have been updated to reflect the proper classification of $20 million of deferred tax balances between Foreign Currency Translation Adjustment and Net Investment Hedges.
(3)
Net of tax benefit (expense) of $0 million, $28 million, $0 million, $(2) million and $26 million, respectively.
(4)
Net of tax (benefit) expense of $0 million, $7 million, $0 million, $2 million and $9 million, respectively.
(In millions)
 
Foreign Currency Translation Adjustment(1)(2)
 
Cash Flow Hedges
 
Net Investment Hedges(1)(2)
 
Other
 
Total
Balance at May 31, 2014
 
$
(11
)
 
$
32

 
$
115

 
$
(51
)
 
$
85

Other comprehensive gains (losses) before reclassifications(3)
 
(20
)
 
1,447

 
—

 
33

 
1,460

Reclassifications to net income of previously deferred (gains) losses(4)
 
—

 
(259
)
 
—

 
(40
)
 
(299
)
Other comprehensive income (loss)
 
(20
)
 
1,188

 
—

 
(7
)
 
1,161

Balance at May 31, 2015
 
$
(31
)
 
$
1,220

 
$
115

 
$
(58
)
 
$
1,246

(1)
The accumulated foreign currency translation adjustment and net investment hedge gains/losses related to an investment in a foreign subsidiary are reclassified to Net income upon sale or upon complete or substantially complete liquidation of the respective entity.
(2)
Beginning and ending balances have been updated to reflect the proper classification of $20 million of deferred tax balances between Foreign Currency Translation Adjustment and Net Investment Hedges.
(3)
Net of tax benefit (expense) of $0 million, $(33) million, $0 million, $0 million and $(33) million, respectively.
(4)
Net of tax (benefit) expense of $0 million, $2 million, $0 million, $0 million and $2 million, respectively.
Reclassification out of Accumulated Other Comprehensive Income 
The following table summarizes the reclassifications from Accumulated other comprehensive income to the Consolidated Statements of Income:
 
 
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
 
Year Ended May 31,
(In millions)
 
2016
 
2015
Gains (losses) on foreign currency translation adjustment
 
$
(2
)
 
$
—

Other (income) expense, net
Total before tax
 
(2
)
 
—

 
Tax (expense) benefit
 
—

 
—

 
Gain (loss) net of tax
 
(2
)
 
—

 
Gains (losses) on cash flow hedges:
 
 
 
 
 
Foreign exchange forwards and options
 
(88
)
 
(95
)
Revenues
Foreign exchange forwards and options
 
586

 
220

Cost of sales
Foreign exchange forwards and options
 
—

 
—

Total selling and administrative expense
Foreign exchange forwards and options
 
219

 
136

Other (income) expense, net
Total before tax
 
717

 
261

 
Tax (expense) benefit
 
(7
)
 
(2
)
 
Gain (loss) net of tax
 
710

 
259

 
Gains (losses) on other
 
3

 
40

Other (income) expense, net
Total before tax
 
3

 
40

 
Tax (expense) benefit
 
(2
)
 
—

 
Gain (loss) net of tax
 
1

 
40

 
Total net gain (loss) reclassified for the period
 
$
709

 
$
299

 
Commitments and Contingencies (Tables)
Schedule of Future Minimum Lease Payments for Capital Leases 
Amounts of minimum future annual commitments under non-cancelable operating and capital leases are as follows (in millions):
 
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Operating leases
 
$
491

 
$
453

 
$
395

 
$
347

 
$
301

 
$
1,244

 
$
3,231

Capital leases
 
$
7

 
$
5

 
$
2

 
$
1

 
$
—

 
$
—

 
$
15

Schedule of Future Minimum Lease Payments for Operating Leases 
Amounts of minimum future annual commitments under non-cancelable operating and capital leases are as follows (in millions):
 
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Operating leases
 
$
491

 
$
453

 
$
395

 
$
347

 
$
301

 
$
1,244

 
$
3,231

Capital leases
 
$
7

 
$
5

 
$
2

 
$
1

 
$
—

 
$
—

 
$
15

Risk Management and Derivatives (Tables)
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value 
The following tables present information about the Company’s derivative assets and liabilities measured at fair value on a recurring basis as of May 31, 2016 and 2015, and indicate the level in the fair value hierarchy in which the Company classifies the fair value measurement.
 
 
As of May 31, 2016
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
603

 
$
487

 
$
116

 
$
145

 
$
115

 
$
30

Embedded derivatives
 
7

 
2

 
5

 
9

 
2

 
7

Interest rate swaps(2)
 
7

 
7

 
—

 
45

 
45

 
—

TOTAL
 
$
617

 
$
496

 
$
121

 
$
199

 
$
162

 
$
37

(1)
If the foreign exchange derivative instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $136 million as of May 31, 2016. As of that date, the Company had received $105 million of cash collateral from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2016.
(2)
As of May 31, 2016, no amount of cash collateral had been received or posted on the derivative asset and liability balances related to the Company's interest rate swaps.
 
 
As of May 31, 2015
 
 
Derivative Assets
 
Derivative Liabilities
(In millions)
 
Assets at Fair Value
 
Other Current Assets
 
Other Long-term Assets
 
Liabilities at Fair Value
 
Accrued Liabilities
 
Other Long-term Liabilities
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options(1)
 
$
1,554

 
$
1,034

 
$
520

 
$
164

 
$
160

 
$
4

Embedded derivatives
 
7

 
2

 
5

 
11

 
2

 
9

Interest rate swaps(2)
 
78

 
78

 
—

 
—

 
—

 
—

TOTAL
 
$
1,639

 
$
1,114

 
$
525

 
$
175

 
$
162

 
$
13

(1)
If the foreign exchange derivative instruments had been netted in the Consolidated Balance Sheets, the asset and liability positions each would have been reduced by $161 million as of May 31, 2015. As of that date, the Company had received $900 million of cash collateral and $74 million of securities from various counterparties related to these foreign exchange derivative instruments. No amount of collateral was posted on the Company’s derivative liability balance as of May 31, 2015.
(2)
As of May 31, 2015, the Company had received $68 million of cash collateral related to its interest rate swap
The following table presents the fair values of derivative instruments included within the Consolidated Balance Sheets as of May 31, 2016 and 2015: 
 
 
Asset Derivatives
 
Liability Derivatives
(In millions)
 
Balance Sheet
Location
 
2016
 
2015
 
Balance Sheet 
Location
 
2016
 
2015
Derivatives formally designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
$
447

 
$
825

 
Accrued liabilities
 
$
38

 
$
140

Interest rate swaps
 
Prepaid expenses and other current assets
 
7

 
78

 
Accrued liabilities
 
45

 
—

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
90

 
520

 
Deferred income taxes and other liabilities
 
12

 
4

Interest rate swaps
 
Deferred income taxes and other assets
 
—

 
—

 
Deferred income taxes and other liabilities
 
—

 
—

Total derivatives formally designated as hedging instruments
 
 
 
544

 
1,423

 
 
 
95

 
144

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
Prepaid expenses and other current assets
 
40

 
209

 
Accrued liabilities
 
76

 
20

Embedded derivatives
 
Prepaid expenses and other current assets
 
2

 
2

 
Accrued liabilities
 
2

 
2

Foreign exchange forwards and options
 
Deferred income taxes and other assets
 
26

 
—

 
Deferred income taxes and other liabilities
 
19

 
—

Embedded derivatives
 
Deferred income taxes and other assets
 
5

 
5

 
Deferred income taxes and other liabilities
 
7

 
9

Total derivatives not designated as hedging instruments
 
 
 
73

 
216

 
 
 
104

 
31

TOTAL DERIVATIVES
 
 
 
$
617

 
$
1,639

 
 
 
$
199

 
$
175

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance 
The following tables present the amounts affecting the Consolidated Statements of Income for the years ended May 31, 2016, 2015 and 2014:

(In millions)
 
Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
on Derivatives(1)
 
Amount of Gain (Loss)
Reclassified From Accumulated
Other Comprehensive Income into Income(1)
Year Ended May 31,
 
Location of Gain (Loss) Reclassified From 
Accumulated Other Comprehensive Income Into Income
 
Year Ended May 31,
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
2015
 
2014
 
 
2016
 
2015
 
2014
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
90

 
$
(202
)
 
$
(48
)
 
Revenues
 
$
(88
)
 
$
(95
)
 
$
14

Foreign exchange forwards and options
 
(57
)
 
1,109

 
(78
)
 
Cost of sales
 
586

 
220

 
12

Foreign exchange forwards and options
 
—

 
—

 
4

 
Total selling and administrative expense
 
—

 
—

 
—

Foreign exchange forwards and options
 
(25
)
 
497

 
(21
)
 
Other (income) expense, net
 
219

 
136

 
10

Interest rate swaps
 
(83
)
 
76

 
—

 
Interest expense (income), net
 
—

 
—

 
—

Total designated cash flow hedges
 
(75
)
 
1,480

 
(143
)
 
 
 
717

 
261

 
36

Derivatives designated as net investment hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
$
—

 
$
—

 
$
—

 
Other (income) expense, net
 
$
—

 
$
—

 
$
—

(1)
For the years ended May 31, 2016, 2015 and 2014, the amounts recorded in Other (income) expense, net as a result of hedge ineffectiveness and the discontinuance of cash flow hedges because the forecasted transactions were no longer probable of occurring were immaterial.
 
 
Amount of Gain (Loss) Recognized in
Income on Derivatives
 
Location of Gain (Loss) 
Recognized in Income on Derivatives
 
 
Year Ended May 31,
 
(In millions)
 
2016
 
2015
 
2014
 
Derivatives designated as fair value hedges:
 
 
 
 
 
 
 
 
Interest rate swaps(1)
 
$
2

 
$
5

 
$
5

 
Interest expense (income), net
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Foreign exchange forwards and options
 
(68
)
 
611

 
(75
)
 
Other (income) expense, net
Embedded derivatives
 
$
(2
)
 
$
(1
)
 
$
(1
)
 
Other (income) expense, net
(1)
All interest rate swaps designated as fair value hedges meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt. Refer to “Fair Value Hedges” in this note for additional detail.
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
0 Months Ended 12 Months Ended
Nov. 19, 2015
May 31, 2016
May 31, 2015
May 31, 2014
Dec. 23, 2015
Significant Accounting Policies [Line Items]
 
 
 
 
 
Stock split ratio for 100 percent of stock dividend declared
2 
 
 
 
 
Dividend payable as result of stock split (as a percent)
 
 
 
 
100.00% 
Reserve balances for sales discounts, returns and miscellaneous claims
 
$ 789 
$ 724 
 
 
Total advertising and promotion expenses
 
3,278 
3,213 
3,031 
 
Prepaid advertising and promotion expenses
 
540 
455 
 
 
Allowance for uncollectible accounts receivable
 
43 
78 
 
 
Increase in non-current assets
 
2,439 
2,587 
 
 
Minimum |
Building
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
2 years 
 
 
 
Minimum |
Leasehold improvements
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
2 years 
 
 
 
Minimum |
Machinery and Equipment
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
2 years 
 
 
 
Minimum |
Software and Software Development Costs
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
2 years 
 
 
 
Maximum |
Building
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
40 years 
 
 
 
Maximum |
Leasehold improvements
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
40 years 
 
 
 
Maximum |
Machinery and Equipment
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
15 years 
 
 
 
Maximum |
Software and Software Development Costs
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Property, plant and equipment, minimum useful life (in years)
 
10 years 
 
 
 
Class B Common Stock
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Stock split ratio for 100 percent of stock dividend declared
2 
 
 
 
 
Class A Convertible Common Stock
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Stock split ratio for 100 percent of stock dividend declared
2 
 
 
 
 
Other Noncurrent Assets
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Allowance for uncollectible accounts receivable
 
17 
24 
 
 
New Accounting Pronouncement, Early Adoption, Effect
 
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
 
Reduction in current assets
 
 
389 
 
 
Increase in non-current assets
 
 
386 
 
 
Reduction of current liabilities
 
 
2 
 
 
Reduction of non-current liabilities
 
 
$ 1 
 
 
Inventories - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Inventory Disclosure [Abstract]
 
 
Inventory balances, were substantially all finished goods
$ 4,838 
$ 4,337 
Property Plant and Equipment (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
$ 7,038 
$ 6,352 
Less accumulated depreciation
3,518 
3,341 
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET
3,520 
3,011 
Land
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
286 
273 
Buildings
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
1,467 
1,250 
Machinery, equipment and internal-use software
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
3,510 
3,329 
Leasehold improvements
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
1,338 
1,150 
Construction in process
 
 
Property, Plant and Equipment [Line Items]
 
 
Total property, plant and equipment, gross
$ 437 
$ 350 
Identifiable Intangible Assets and Goodwill - Additional Information (Detail) (USD $)
May 31, 2016
May 31, 2015
Goodwill and Intangible Assets Disclosure [Line Items]
 
 
Indefinite-lived trademarks
$ 281,000,000 
$ 281,000,000 
Goodwill
131,000,000 
131,000,000 
Goodwill, impaired, accumulated impairment loss
0 
0 
Converse
 
 
Goodwill and Intangible Assets Disclosure [Line Items]
 
 
Goodwill
65,000,000 
65,000,000 
Acquired Trademarks and Other Intangibles
 
 
Goodwill and Intangible Assets Disclosure [Line Items]
 
 
Finite-lived intangible assets, gross
$ 16,000,000 
$ 17,000,000 
Accrued Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Accrued Liabilities, Current [Abstract]
 
 
Compensation and benefits, excluding taxes
$ 943 
$ 997 
Endorsement compensation
393 
388 
Dividends payable
271 
240 
Import and logistics costs
198 
207 
Fair value of derivatives
162 
162 
Taxes other than income taxes payable
159 
172 
Advertising and marketing
119 
117 
Collateral received from counterparties to hedging instruments
105 
968 
Other
687 
698 
TOTAL ACCRUED LIABILITIES
$ 3,037 
$ 3,949 
Maximum percent of accrued liabilities to be included in Other
5.00% 
5.00% 
Fair Value Measurements - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (Fair Value, Measurements, Recurring, USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Assets, Fair Value Disclosure [Abstract]
 
 
Cash
$ 774 
$ 615 
Assets at Fair Value
5,467 
5,932 
Cash Equivalents
3,138 
3,852 
Short-term Investments
2,319 
2,072 
Other Long-term Assets
10 
8 
Fair Value, Inputs, Level 1 |
U.S. Treasury securities
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Assets at Fair Value
1,265 
869 
Cash Equivalents
100 
225 
Short-term Investments
1,165 
644 
Other Long-term Assets
0 
0 
Fair Value, Inputs, Level 2
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Assets at Fair Value
3,418 
4,440 
Cash Equivalents
2,264 
3,012 
Short-term Investments
1,154 
1,428 
Other Long-term Assets
0 
0 
Fair Value, Inputs, Level 2 |
Time deposits
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Assets at Fair Value
831 
684 
Cash Equivalents
827 
684 
Short-term Investments
4 
0 
Other Long-term Assets
0 
0 
Fair Value, Inputs, Level 2 |
U.S. Agency securities
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Assets at Fair Value
679 
976 
Cash Equivalents
0 
110 
Short-term Investments
679 
866 
Other Long-term Assets
0 
0 
Fair Value, Inputs, Level 2 |
Commercial paper and bonds
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Assets at Fair Value
733 
914 
Cash Equivalents
262 
352 
Short-term Investments
471 
562 
Other Long-term Assets
0 
0 
Fair Value, Inputs, Level 2 |
Money market funds
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Assets at Fair Value
1,175 
1,866 
Cash Equivalents
1,175 
1,866 
Short-term Investments
0 
0 
Other Long-term Assets
0 
0 
Fair Value, Inputs, Level 3 |
Non-marketable preferred stock
 
 
Assets, Fair Value Disclosure [Abstract]
 
 
Assets at Fair Value
10 
8 
Cash Equivalents
0 
0 
Short-term Investments
0 
0 
Other Long-term Assets
$ 10 
$ 8 
Fair Value Measurements - Derivative Assets and Liabilities at Fair Value (Detail) (USD $)
12 Months Ended
May 31, 2016
May 31, 2015
Derivatives, Fair Value [Line Items]
 
 
Accrued Liabilities
$ 162,000,000 
$ 162,000,000 
Collateral received from counterparties to hedging instruments
105,000,000 
968,000,000 
Fair value transfers between fair value hierarchy levels
0 
0 
Fair Value, Measurements, Recurring
 
 
Derivatives, Fair Value [Line Items]
 
 
Reduction in derivative liabilities if netted
136,000,000 
161,000,000 
Reduction In derivative asset if netted
136,000,000 
161,000,000 
Fair Value, Inputs, Level 2 |
Fair Value, Measurements, Recurring
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
617,000,000 
1,639,000,000 
Other Current Assets
496,000,000 
1,114,000,000 
Other Long-term Assets
121,000,000 
525,000,000 
Liabilities at Fair Value
199,000,000 
175,000,000 
Accrued Liabilities
162,000,000 
162,000,000 
Other Long-term Liabilities
37,000,000 
13,000,000 
Fair Value, Inputs, Level 2 |
Fair Value, Measurements, Recurring |
Foreign Exchange Contract
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
603,000,000 
1,554,000,000 
Other Current Assets
487,000,000 
1,034,000,000 
Other Long-term Assets
116,000,000 
520,000,000 
Liabilities at Fair Value
145,000,000 
164,000,000 
Accrued Liabilities
115,000,000 
160,000,000 
Other Long-term Liabilities
30,000,000 
4,000,000 
Fair Value, Inputs, Level 2 |
Fair Value, Measurements, Recurring |
Embedded derivatives
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
7,000,000 
7,000,000 
Other Current Assets
2,000,000 
2,000,000 
Other Long-term Assets
5,000,000 
5,000,000 
Liabilities at Fair Value
9,000,000 
11,000,000 
Accrued Liabilities
2,000,000 
2,000,000 
Other Long-term Liabilities
7,000,000 
9,000,000 
Fair Value, Inputs, Level 2 |
Fair Value, Measurements, Recurring |
Interest rate swaps
 
 
Derivatives, Fair Value [Line Items]
 
 
Assets at Fair Value
7,000,000 
78,000,000 
Other Current Assets
7,000,000 
78,000,000 
Other Long-term Assets
0 
0 
Liabilities at Fair Value
45,000,000 
0 
Accrued Liabilities
45,000,000 
0 
Other Long-term Liabilities
0 
0 
Cash and Cash Equivalents
 
 
Derivatives, Fair Value [Line Items]
 
 
Collateral received from counterparties to hedging instruments
105,000,000 
 
Cash and Cash Equivalents |
Foreign Exchange Contract
 
 
Derivatives, Fair Value [Line Items]
 
 
Collateral received from counterparties to hedging instruments
105,000,000 
900,000,000 
Derivative liability, fair value of collateral
0 
0 
Cash and Cash Equivalents |
Interest rate swaps
 
 
Derivatives, Fair Value [Line Items]
 
 
Collateral received from counterparties to hedging instruments
0 
68,000,000 
Securities Pledged as Collateral |
Interest rate swaps
 
 
Derivatives, Fair Value [Line Items]
 
 
Collateral received from counterparties to hedging instruments
 
$ 74,000,000 
Fair Value Measurements - Additional Information (Detail) (USD $)
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
 
Fair value transfers between fair value hierarchy levels
$ 0 
$ 0 
 
Short-term Investments
 
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
 
Available-for-sale securities with maturity dates within one year from purchase date
2,113,000,000 
 
 
Available-for-sale securities with maturity dates over one year and less than five years from purchase date
206,000,000 
 
 
Interest (income) expense, net
 
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
 
Interest income related to cash and equivalents and short-term investments
12,000,000 
6,000,000 
5,000,000 
Fair Value, Inputs, Level 2 |
Estimate of Fair Value Measurement |
Prepaid expenses and other current assets
 
 
 
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
 
 
 
Outstanding receivables
$ 0 
$ 150,000,000 
 
Short-Term Borrowings and Credit Lines - Notes Payable to Banks and Interest Bearing Accounts Payable to Sojitz Corporation of America (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Notes payable:
 
 
TOTAL NOTES PAYABLE
$ 1 
$ 74 
Sojitz America
 
 
Interest-bearing accounts payable:
 
 
Sojitz America
39 
78 
Sojitz America - interest rate
1.27% 
0.98% 
Notes Payable
 
 
Notes payable:
 
 
TOTAL NOTES PAYABLE
1 
74 
Notes Payable |
UNITED STATES
 
 
Notes payable:
 
 
TOTAL NOTES PAYABLE
0 
0 
Notes payable - interest rate
0.00% 
0.00% 
Notes Payable |
Non-U.S. operations
 
 
Notes payable:
 
 
TOTAL NOTES PAYABLE
$ 1 
$ 74 
Notes payable - interest rate
13.00% 
12.39% 
Short Term Borrowings and Credit Lines - Additional Information (Detail) (USD $)
12 Months Ended
May 31, 2016
Aug. 28, 2015
May 31, 2015
Nov. 1, 2011
Commercial Paper
 
 
 
 
Short-term Debt [Line Items]
 
 
 
 
Line of credit facility, amount outstanding
$ 0 
 
$ 0 
 
Revolving Credit Facility
 
 
 
 
Short-term Debt [Line Items]
 
 
 
 
Borrowing capacity
2,000,000,000 
2,000,000,000 
 
1,000,000,000 
Line of Credit Facility Extension Period After Maturity
1 year 
 
 
 
Revolving credit facility, fee
0.045% 
 
 
 
Line of credit facility, amount outstanding
$ 0 
 
$ 0 
 
Sojitz America |
Interest Bearing Accounts Payable
 
 
 
 
Short-term Debt [Line Items]
 
 
 
 
Accounts payable, due date period (in days)
60 days 
 
 
 
60-day London Interbank Offered Rate (LIBOR) |
Interest Bearing Accounts Payable
 
 
 
 
Short-term Debt [Line Items]
 
 
 
 
Basis spread on variable rate, above LIBOR
0.75% 
 
 
 
London Interbank Offered Rate (LIBOR) |
Revolving Credit Facility
 
 
 
 
Short-term Debt [Line Items]
 
 
 
 
Basis spread on variable rate, above LIBOR
0.455% 
 
 
 
Long-Term Debt - Net of Unamortized Premiums and Discounts and Swap Fair Value Adjustments (Detail)
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
May 31, 2016
USD ($)
May 31, 2015
USD ($)
May 31, 2016
Corporate Bond Payables
5.15% Corporate bond, payable October 15, 2015
USD ($)
May 31, 2015
Corporate Bond Payables
5.15% Corporate bond, payable October 15, 2015
USD ($)
May 31, 2016
Corporate Bond Payables
2.25% Corporate bond, payable May 1, 2023
USD ($)
May 31, 2015
Corporate Bond Payables
2.25% Corporate bond, payable May 1, 2023
USD ($)
May 31, 2016
Corporate Bond Payables
3.63% Corporate bond, payable May 1, 2043
USD ($)
May 31, 2015
Corporate Bond Payables
3.63% Corporate bond, payable May 1, 2043
USD ($)
May 31, 2016
Corporate Bond Payables
3.88% Corporate bond, payable November 1, 2045
USD ($)
May 31, 2015
Corporate Bond Payables
3.88% Corporate bond, payable November 1, 2045
USD ($)
May 31, 2016
Notes Payable
6.20% Promissory note, payable April 1, 2017
USD ($)
May 31, 2015
Notes Payable
6.20% Promissory note, payable April 1, 2017
USD ($)
May 31, 2016
Notes Payable
6.79% Promissory note, payable January 1, 2018
USD ($)
May 31, 2015
Notes Payable
6.79% Promissory note, payable January 1, 2018
USD ($)
May 31, 2016
Notes Payable
2.60% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
USD ($)
May 31, 2016
Notes Payable
2.60% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
May 31, 2015
Notes Payable
2.60% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
USD ($)
May 31, 2016
Notes Payable
2.00% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
USD ($)
May 31, 2016
Notes Payable
2.00% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
May 31, 2015
Notes Payable
2.00% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
USD ($)
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, original principal
 
 
$ 100,000,000 
 
$ 500,000,000 
 
$ 500,000,000 
 
$ 1,000,000,000 
 
$ 40,000,000 
 
$ 19,000,000 
 
 
¥ 9,000,000,000 
 
 
¥ 4,000,000,000 
 
Long-term debt, interest rate
 
 
5.15% 
 
2.25% 
 
3.63% 
 
3.88% 
 
6.20% 
 
6.79% 
 
2.60% 
2.60% 
 
2.00% 
2.00% 
 
Long-term debt, interest payment
 
 
Semi-Annually 
 
Semi-Annually 
 
Semi-Annually 
 
Semi-Annually 
 
Monthly 
 
Monthly 
 
Quarterly 
Quarterly 
 
Quarterly 
Quarterly 
 
Long Term Debt
2,054,000,000 
1,186,000,000 
0 
101,000,000 
499,000,000 
499,000,000 
499,000,000 
499,000,000 
991,000,000 
0 
38,000,000 
39,000,000 
0 
19,000,000 
18,000,000 
 
20,000,000 
9,000,000 
 
9,000,000 
Less current maturities
44,000,000 
107,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL LONG-TERM DEBT
$ 2,010,000,000 
$ 1,079,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-Term Debt - Narrative (Detail)
12 Months Ended 9 Months Ended 12 Months Ended
May 31, 2016
Corporate bonds, 2.25% due May 1, 2023 and 3.63% due May 1, 2043
Feb. 29, 2016
3.88% Corporate bond, payable November 1, 2045
May 31, 2016
6.2% and 6.79% Promissory notes, payable April 1, 2017 and January 1, 2018
USD ($)
May 31, 2016
2.6% and 2.0% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
May 31, 2016
Corporate Bond Payables
5.15% Corporate bond, payable October 15, 2015
USD ($)
May 31, 2016
Corporate Bond Payables
2.25% Corporate bond, payable May 1, 2023
USD ($)
May 31, 2016
Corporate Bond Payables
3.63% Corporate bond, payable May 1, 2043
USD ($)
May 31, 2016
Corporate Bond Payables
3.88% Corporate bond, payable November 1, 2045
USD ($)
May 31, 2016
Notes Payable
6.20% Promissory note, payable April 1, 2017
USD ($)
May 31, 2016
Notes Payable
6.79% Promissory note, payable January 1, 2018
USD ($)
May 31, 2016
Notes Payable
2.60% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
May 31, 2016
Notes Payable
2.00% Japanese Yen note, maturing August 20, 2001 through November 20, 2020
JPY (¥)
May 31, 2016
Land and Building [Member]
USD ($)
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, maturity date
 
 
 
 
Oct. 15, 2015 
May 01, 2023 
May 01, 2043 
Nov. 01, 2045 
Apr. 01, 2017 
Jan. 01, 2018 
Nov. 20, 2020 
Nov. 20, 2020 
 
Long-term debt, original principal
 
 
$ 59,000,000 
¥ 13,000,000,000 
$ 100,000,000 
$ 500,000,000 
$ 500,000,000 
$ 1,000,000,000 
$ 40,000,000 
$ 19,000,000 
¥ 9,000,000,000 
¥ 4,000,000,000 
 
Purchase of properties
 
 
 
 
 
 
 
 
 
 
 
 
$ 85,000,000 
Debt instrument, minimum maturity date
 
 
 
Aug. 20, 2001 
 
 
 
 
 
 
 
 
 
Debt instrument, maximum maturity date
 
 
 
Nov. 20, 2020 
 
 
 
 
 
 
 
 
 
Percent of aggregate principal amount of the notes to be redeemed
100.00% 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
Long-Term Debt - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Debt Disclosure [Abstract]
 
 
Maturity of long-term debt next fiscal year
$ 44 
 
Maturity of long-term debt in year two
6 
 
Maturity of long-term debt in year three
6 
 
Maturity of long-term debt in year four
6 
 
Maturity of long-term debt in year five
3 
 
Fair value of long term debt
$ 2,125 
$ 1,160 
Income Taxes - Income before Income Taxes (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Income before income taxes:
 
 
 
United States
$ 956 
$ 1,967 
$ 3,066 
Foreign
3,667 
2,238 
478 
Income before income taxes
$ 4,623 
$ 4,205 
$ 3,544 
Income Taxes - Provision for Income Taxes (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Current:
 
 
 
Federal
$ 304 
$ 596 
$ 259 
State
71 
80 
104 
Foreign
568 
369 
499 
Total
943 
1,045 
862 
Deferred:
 
 
 
Federal
(57)
(66)
19 
State
(16)
(11)
(3)
Foreign
(7)
(36)
(27)
Total
(80)
(113)
(11)
Income tax expense
$ 863 
$ 932 
$ 851 
Income Taxes - Reconciliation from United States Statutory Federal Income Tax Rate to Effective Income Tax Rate (Detail)
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Income Tax Disclosure [Abstract]
 
 
 
Federal income tax rate
35.00% 
35.00% 
35.00% 
State taxes, net of federal benefit
1.10% 
0.90% 
1.80% 
Foreign earnings
(18.60%)
(15.70%)
2.20% 
Deferred charge
0.40% 
0.90% 
(14.60%)
Other, net
0.80% 
1.10% 
(0.40%)
EFFECTIVE INCOME TAX RATE
18.70% 
22.20% 
24.00% 
Income Taxes - Deferred Tax Assets and Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Deferred tax assets:
 
 
Allowance for doubtful accounts
$ 5 
$ 11 
Inventories
88 
59 
Sales return reserves
182 
143 
Deferred compensation
274 
258 
Stock-based compensation
206 
179 
Reserves and accrued liabilities
78 
92 
Net operating loss carry-forwards
44 
10 
Undistributed earnings of foreign subsidiaries
179 
149 
Other
72 
76 
Total deferred tax assets
1,128 
977 
Valuation allowance
(52)
(9)
Total deferred tax assets after valuation allowance
1,076 
968 
Deferred tax liabilities:
 
 
Property, plant and equipment
(268)
(220)
Intangibles
(92)
(93)
Other
(4)
(38)
Total deferred tax liability
(364)
(351)
NET DEFERRED TAX ASSET
$ 712 
$ 617 
Income Taxes - Reconciliation of Changes in Gross Balance of Unrecognized Tax Benefits (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
 
 
 
Unrecognized tax benefits, as of the beginning of the period
$ 438 
$ 506 
$ 447 
Gross increases related to prior period tax positions
49 
32 
814 
Gross decreases related to prior period tax positions
(20)
(123)
(166)
Gross increases related to current period tax positions
81 
82 
125 
Gross decreases related to current period tax positions
0 
(9)
(30)
Settlements
(13)
(27)
(676)
Lapse of statute of limitations
(17)
(10)
(4)
Changes due to currency translation
(12)
(13)
(4)
UNRECOGNIZED TAX BENEFITS, AS OF THE END OF THE PERIOD
$ 506 
$ 438 
$ 506 
Income Taxes - Additional Information (Detail) (USD $)
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
May 31, 2013
Income Tax Contingency [Line Items]
 
 
 
 
Effective tax rate, change from prior period
(3.50%)
(1.80%)
 
 
Total gross unrecognized tax benefits, excluding related interest and penalties
$ 506,000,000 
$ 438,000,000 
$ 506,000,000 
$ 447,000,000 
Total gross unrecognized tax benefits, excluding related interest and penalties, amount which would affect the Company's effective tax rate if recognized in future periods
290,000,000 
 
 
 
Increase (decrease) in liability for payment of interest and penalties
45,000,000 
(3,000,000)
55,000,000 
 
Accrued interest and penalties related to uncertain tax positions (excluding federal benefit)
209,000,000 
164,000,000 
 
 
Estimated decrease in total gross unrecognized tax benefits as a result of resolutions of global tax examinations and expiration of applicable statutes of limitations
92,000,000 
 
 
 
Reinvestment of the cumulative undistributed earnings of certain foreign subsidiaries
10,700,000,000 
 
 
 
Unrecognized deferred tax liability associated with the indefinitely reinvested undistributed earnings
3,600,000,000 
 
 
 
Tax holiday, expiration period
2021 
 
 
 
Decrease in income tax expense related to tax holiday
173,000,000 
174,000,000 
138,000,000 
 
Decrease in income tax expense related to tax holiday per diluted share, (in dollars per share)
$ 0.10 
$ 0.10 
$ 0.08 
 
Valuation allowance increase (decrease) related to tax benefits of certain subsidiaries with operating losses
43,000,000 
0 
4,000,000 
 
Available domestic and foreign loss carry-forwards
143,000,000 
 
 
 
Income tax benefits attributable to employee stock-based compensation
281,000,000 
224,000,000 
135,000,000 
 
Tax Year 2012 |
Domestic Tax Authority
 
 
 
 
Income Tax Contingency [Line Items]
 
 
 
 
Proposed increase in tax related to the foreign tax credit matter
223,000,000 
 
 
 
Tax Year 2011 |
Domestic Tax Authority
 
 
 
 
Income Tax Contingency [Line Items]
 
 
 
 
Proposed increase in tax related to the foreign tax credit matter
$ 31,000,000 
 
 
 
Income Taxes - Available Domestic and Foreign Loss Carryforwards (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2016
Income Tax Disclosure [Abstract]
 
2017
$ 1 
2018
4 
2019
1 
2020
1 
2021-2035
35 
Indefinite
101 
Net Operating Losses
$ 143 
Redeemable Preferred Stock - Additional Information (Detail) (Non-marketable preferred stock, USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
May 31, 2016
Non-marketable preferred stock
 
Temporary Equity [Line Items]
 
Redeemable preferred stock, par value
$ 1 
Redeemable preferred stock, redeemable value (in dollars)
$ 0.3 
Redeemable preferred stock, dividends payable annually per share
$ 0.1 
Common Stock and Stock-Based Compensation - Additional Information (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Class A Convertible Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Common stock, no par value
$ 0 
 
 
Common stock, number of shares authorized (in shares)
400,000,000 
 
 
Common stock conversion
Each share of Class A Common Stock is convertible into one share of Class B Common Stock. 
 
 
Common stock, Class A conversion ratio to Class B (in shares)
1 
 
 
Class B Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Common stock, no par value
$ 0 
 
 
Common stock, number of shares authorized (in shares)
2,400,000,000 
 
 
Stock Incentive Plan |
Class B Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Shares available for grant (in shares)
718,000,000 
 
 
Stock options vesting period (in years)
4 years 
 
 
Stock options expiration from the date of grant (in years)
10 years 
 
 
Minimum term of market traded options for estimates of expected volatility (in years)
1 year 
 
 
Weighted average remaining contractual life for options outstanding (in years)
6 years 
 
 
Weighted average remaining contractual life for options exercisable (in years)
4 years 7 months 6 days 
 
 
Aggregate intrinsic value for options outstanding
$ 2,806 
 
 
Aggregate intrinsic value for options exercisable
2,242 
 
 
Total intrinsic value of options exercised
946 
795 
474 
Stock options |
Stock Incentive Plan
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures
245 
 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized as operating overhead expense over a weighted average period (in years)
2 years 
 
 
Stock options |
Stock Incentive Plan |
Class B Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Weighted average fair value per share of the options granted (in dollars per share)
$ 12.66 
$ 8.48 
$ 7.45 
Employee Stock |
Class B Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Employee stock purchase plans, payroll deductions
10.00% 
 
 
Employee stock purchase plan offering period
6 months 
 
 
Shares purchased, price as percentage of lower of the fair market value
85.00% 
 
 
Purchase of shares by employee (in shares)
2,500,000 
2,700,000 
2,800,000 
Restricted stock |
Stock Incentive Plan
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Unrecognized compensation costs from stock options, net of estimated forfeitures, to be recognized as operating overhead expense over a weighted average period (in years)
2 years 9 months 18 days 
 
 
Unrecognized compensation costs from restricted stock, net of estimated forfeitures
62 
 
 
Restricted stock |
Stock Incentive Plan |
Class B Common Stock
 
 
 
Common Stock and Share Based Compensation [Line Items]
 
 
 
Restricted and unrestricted stock granted to key employees under 1990 Plan, number of shares (in shares)
1,000,000 
500,000 
600,000 
Restricted stock granted to key employees under 1990 Plan, weighted average values per share (in dollars per shares)
$ 54.87 
$ 39.69 
$ 31.94 
Restricted stock vested, fair value
$ 49 
$ 20 
$ 28 
Common Stock and Stock-Based Compensation - Total Stock-Based Compensation Expense (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
$ 236 
$ 191 
$ 177 
Accelerated stock option expense
30 
19 
15 
General and Administrative Expense
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
236 
191 
177 
General and Administrative Expense |
Stock options
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
171 
136 
125 
General and Administrative Expense |
ESPPs
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
31 
24 
22 
General and Administrative Expense |
Restricted stock
 
 
 
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
 
 
 
Stock-based compensation expense
$ 34 
$ 31 
$ 30 
Common Stock and Stock-Based Compensation - Weighted Average Assumptions Used to Estimate Fair Values (Detail) (Stock options)
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Stock options
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
Dividend yield
1.00% 
1.20% 
1.30% 
Expected volatility
23.60% 
23.60% 
27.90% 
Weighted average expected life
5 years 9 months 18 days 
5 years 9 months 18 days 
5 years 3 months 
Risk-free interest rate
1.70% 
1.70% 
1.30% 
Common Stock and Stock-Based Compensation - Stock Option Transactions Under Plan (Detail) (Stock Incentive Plan, USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Stock Incentive Plan
 
 
 
Options Outstanding - Shares
 
 
 
Beginning Balance (in shares)
116.2 
127.1 
135.3 
Exercised (in shares)
(22.5)
(27.2)
(22.0)
Forfeited (in shares)
(2.3)
(2.1)
(2.5)
Granted (in shares)
20.6 
18.4 
16.3 
Ending Balance (in shares)
112.0 
116.2 
127.1 
Options exercisable (in shares)
66.5 
68.6 
74.0 
Options Outstanding - Weighted-Average Option Price
 
 
 
Beginning Balance (in dollars per share)
$ 23.50 
$ 19.64 
$ 17.36 
Exercised (in dollars per share)
$ 17.75 
$ 15.39 
$ 14.15 
Forfeited (in dollars per share)
$ 39.96 
$ 29.51 
$ 24.17 
Granted (in dollars per share)
$ 56.41 
$ 38.84 
$ 31.77 
Ending Balance (in dollars per share)
$ 30.38 
$ 23.50 
$ 19.64 
Options exercisable (in dollars per share)
$ 21.48 
$ 18.26 
$ 15.71 
Earnings Per Share - Additional Information (Detail) (Stock options)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Stock options
 
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
 
Anti-dilutive options not included in the computation of diluted earnings per share
0.2 
1.7 
1.5 
Earnings Per Share - Reconciliation from Basic Earnings Per Share to Diluted Earnings Per Share (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Determination of shares:
 
 
 
Weighted average common shares outstanding
1,697.9 
1,723.5 
1,766.7 
Assumed conversion of dilutive stock options and awards
44.6 
45.3 
44.9 
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
1,742.5 
1,768.8 
1,811.6 
Earnings per common share:
 
 
 
Basic (in dollars per share)
$ 2.21 
$ 1.90 
$ 1.52 
Diluted (in dollars per share)
$ 2.16 
$ 1.85 
$ 1.49 
Benefit Plans - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Deferred income taxes and other long-term liabilities
 
 
 
Defined Contribution Plan Disclosure [Line Items]
 
 
 
Deferred compensation plan liabilities
$ 475 
$ 443 
 
Liability related to the unfunded pension plan
93 
98 
 
General and Administrative Expense
 
 
 
Defined Contribution Plan Disclosure [Line Items]
 
 
 
401(k) employee savings plans, expenses
72 
58 
51 
General and Administrative Expense |
Profit Sharing Plan
 
 
 
Defined Contribution Plan Disclosure [Line Items]
 
 
 
Contribution and cash award expenses included in selling and administrative expenses
64 
58 
49 
General and Administrative Expense |
Long Term Incentive Plan
 
 
 
Defined Contribution Plan Disclosure [Line Items]
 
 
 
Contribution and cash award expenses included in selling and administrative expenses
$ 85 
$ 68 
$ 46 
Accumulated Other Comprehensive Income - Changes in AOCI (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
Beginning balance
$ 1,246 
$ 85 
 
Other comprehensive gains (losses) before reclassifications, net of tax
(219)
1,460 
 
Reclassifications to net income of previously deferred (gains) losses, net of tax
(709)
(299)
 
Total other comprehensive income (loss), net of tax
(928)
1,161 
(189)
Ending balance
318 
1,246 
85 
Other comprehensive income, before reclassification, tax benefit (expense)
26 
(33)
 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
9 
2 
 
Foreign Currency Translation Adjustment
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
Beginning balance
(31)
(11)
 
Other comprehensive gains (losses) before reclassifications, net of tax
(178)
(20)
 
Reclassifications to net income of previously deferred (gains) losses, net of tax
2 
0 
 
Total other comprehensive income (loss), net of tax
(176)
(20)
 
Ending balance
(207)
(31)
 
Other comprehensive income, before reclassification, tax benefit (expense)
0 
0 
 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
0 
0 
 
Foreign Currency Translation Adjustment |
Revisions
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
Ending balance
 
(20)
(20)
Cash Flow Hedges
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
Beginning balance
1,220 
32 
 
Other comprehensive gains (losses) before reclassifications, net of tax
(47)
1,447 
 
Reclassifications to net income of previously deferred (gains) losses, net of tax
(710)
(259)
 
Total other comprehensive income (loss), net of tax
(757)
1,188 
 
Ending balance
463 
1,220 
 
Other comprehensive income, before reclassification, tax benefit (expense)
28 
(33)
 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
7 
2 
 
Net Investment Hedges
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
Beginning balance
115 
115 
 
Other comprehensive gains (losses) before reclassifications, net of tax
0 
0 
 
Reclassifications to net income of previously deferred (gains) losses, net of tax
0 
0 
 
Total other comprehensive income (loss), net of tax
0 
0 
 
Ending balance
115 
115 
 
Other comprehensive income, before reclassification, tax benefit (expense)
0 
0 
 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
0 
0 
 
Net Investment Hedges |
Revisions
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
Ending balance
 
20 
20 
Other
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
Beginning balance
(58)
(51)
 
Other comprehensive gains (losses) before reclassifications, net of tax
6 
33 
 
Reclassifications to net income of previously deferred (gains) losses, net of tax
(1)
(40)
 
Total other comprehensive income (loss), net of tax
5 
(7)
 
Ending balance
(53)
(58)
 
Other comprehensive income, before reclassification, tax benefit (expense)
(2)
0 
 
Reclassification from accumulated other comprehensive income, tax (benefit) expense
$ 2 
$ 0 
 
Accumulated Other Comprehensive Income - Reclassification out of AOCI (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Other expense (income), net
$ 140 
$ 58 
$ (103)
Revenues
32,376 
30,601 
27,799 
Cost of sales
(17,405)
(16,534)
(15,353)
Selling and administrative expense
(10,469)
(9,892)
(8,766)
Income before income taxes
4,623 
4,205 
3,544 
Tax benefit (expense)
(863)
(932)
(851)
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Gain (loss), net of tax
709 
299 
 
Foreign Currency Translation Adjustment |
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Other expense (income), net
(2)
0 
 
Income before income taxes
(2)
0 
 
Tax benefit (expense)
0 
0 
 
Gain (loss), net of tax
(2)
0 
 
Gain (losses) on cash flow hedges |
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Income before income taxes
717 
261 
 
Tax benefit (expense)
(7)
(2)
 
Gain (loss), net of tax
710 
259 
 
Gain (losses) on cash flow hedges |
Foreign exchange forwards and options |
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Other expense (income), net
219 
136 
 
Revenues
(88)
(95)
 
Cost of sales
586 
220 
 
Selling and administrative expense
0 
0 
 
Other |
Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
 
 
 
Reclassification out of Accumulated Other Comprehensive Income [Line Items]
 
 
 
Other expense (income), net
3 
40 
 
Income before income taxes
3 
40 
 
Tax benefit (expense)
(2)
0 
 
Gain (loss), net of tax
$ 1 
$ 40 
 
Commitments and Contingencies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Commitments and Contingencies Disclosure [Abstract]
 
 
 
Expiration date of operating lease, lower limit (in years)
1 year 
 
 
Expiration date of operating lease, upper limit (in years)
18 years 
 
 
Rent expense
$ 661 
$ 594 
$ 533 
Minimum rental commitments, operating leases, 2017
491 
 
 
Minimum rental commitments, operating leases, 2018
453 
 
 
Minimum rental commitments, operating leases, 2019
395 
 
 
Minimum rental commitments, operating leases, 2020
347 
 
 
Minimum rental commitments, operating leases, 2021
301 
 
 
Minimum rental commitments, operating leases, thereafter
1,244 
 
 
Operating leases
3,231 
 
 
Minimum commitments, capital leases, 2017
7 
 
 
Minimum commitments, capital leases, 2018
5 
 
 
Minimum commitments, capital leases, 2019
2 
 
 
Minimum commitments, capital leases, 2020
1 
 
 
Minimum commitments, capital leases, 2021
0 
 
 
Minimum commitments, capital leases, thereafter
0 
 
 
Capital leases
15 
 
 
Letters of credit outstanding
$ 157 
$ 165 
 
Risk Management and Derivatives - Additional Information (Detail) (USD $)
12 Months Ended 12 Months Ended 0 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
May 31, 2016
Not designated as derivative instrument
May 31, 2016
Embedded derivatives
May 31, 2016
Minimum
May 31, 2016
Maximum
May 31, 2016
Derivatives designated as cash flow hedges
Oct. 29, 2015
Derivatives designated as cash flow hedges
Designated as Hedging Instrument
Interest rate swaps
May 31, 2016
Derivatives designated as cash flow hedges
Designated as Hedging Instrument
Interest rate swaps
Nov. 30, 2015
Derivatives designated as cash flow hedges
Designated as Hedging Instrument
Interest rate swaps
May 31, 2016
Derivatives designated as fair value hedges
Interest rate swaps
May 31, 2016
Derivatives designated as net investment hedges
Foreign Exchange Contract
May 31, 2016
Cash and Cash Equivalents
May 31, 2016
Cash and Cash Equivalents
Interest rate swaps
May 31, 2015
Cash and Cash Equivalents
Interest rate swaps
May 31, 2016
Cash and Cash Equivalents
Foreign Exchange Contract
May 31, 2015
Cash and Cash Equivalents
Foreign Exchange Contract
Derivative Instruments and Hedging Activities Disclosures [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Typical time period that anticipated exposures are hedged against (in months)
 
 
 
 
 
12 months 
24 months 
 
 
 
 
 
 
 
 
 
 
 
Percentage of anticipated exposures hedged (percent)
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total notional amount of outstanding derivatives
 
 
 
$ 7,100,000,000 
$ 282,000,000 
 
 
$ 11,500,000,000 
 
$ 1,500,000,000 
 
$ 0 
 
 
 
 
 
 
Derivative, notional amount, terminated
 
 
 
 
 
 
 
 
 
 
1,000,000,000 
 
 
 
 
 
 
 
Derivative, cash received on hedge
 
 
 
 
 
 
 
 
34,000,000 
 
 
 
 
 
 
 
 
 
Ineffectiveness for cash flow hedges
0 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets (liabilities), at fair value, net
 
 
 
 
 
 
 
 
 
 
 
 
0 
 
 
 
 
 
Deferred net gains (net of tax) on both outstanding and matured derivatives accumulated in other comprehensive income are expected to be reclassified to net income during the next twelve months as a result of underlying hedged transactions also being recorded in net income
460,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum term over which the Company is hedging exposures to the variability of cash flows for its forecasted and recorded transactions (in months)
24 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedge ineffectiveness
0 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount of ineffectiveness on net investment hedges
0 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum fair value of outstanding derivative above which the credit related contingent features require the derivative party to post collateral
 
 
 
 
 
50,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate fair value of derivative instruments in net liability position
3,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateral received from counterparties to hedging instruments
$ 105,000,000 
$ 968,000,000 
 
 
 
 
 
 
 
 
 
 
 
$ 105,000,000 
$ 0 
$ 68,000,000 
$ 105,000,000 
$ 900,000,000 
Risk Management and Derivatives - FV of Derivative Instruments Included within Consolidated Balance Sheet (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
$ 617 
$ 1,639 
Liability Derivatives
199 
175 
Designated as Hedging Instrument
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
544 
1,423 
Liability Derivatives
95 
144 
Designated as Hedging Instrument |
Foreign Exchange Contract |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
447 
825 
Designated as Hedging Instrument |
Foreign Exchange Contract |
Deferred income taxes and other assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
90 
520 
Designated as Hedging Instrument |
Foreign Exchange Contract |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
38 
140 
Designated as Hedging Instrument |
Foreign Exchange Contract |
Deferred income taxes and other liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
12 
4 
Designated as Hedging Instrument |
Interest rate swaps |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
7 
78 
Designated as Hedging Instrument |
Interest rate swaps |
Deferred income taxes and other assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
0 
0 
Designated as Hedging Instrument |
Interest rate swaps |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
45 
0 
Designated as Hedging Instrument |
Interest rate swaps |
Deferred income taxes and other liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
0 
0 
Derivatives not designated as hedging instruments
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
73 
216 
Liability Derivatives
104 
31 
Derivatives not designated as hedging instruments |
Foreign Exchange Contract |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
40 
209 
Derivatives not designated as hedging instruments |
Foreign Exchange Contract |
Deferred income taxes and other assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
26 
0 
Derivatives not designated as hedging instruments |
Foreign Exchange Contract |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
76 
20 
Derivatives not designated as hedging instruments |
Foreign Exchange Contract |
Deferred income taxes and other liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
19 
0 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Prepaid expenses and other current assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
2 
2 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Deferred income taxes and other assets
 
 
Derivatives, Fair Value [Line Items]
 
 
Asset Derivatives
5 
5 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Accrued liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
2 
2 
Derivatives not designated as hedging instruments |
Embedded derivatives |
Deferred income taxes and other liabilities
 
 
Derivatives, Fair Value [Line Items]
 
 
Liability Derivatives
$ 7 
$ 9 
Risk Management and Derivatives - Amounts Affecting Consolidated Statements of Income (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Foreign Exchange Contract |
Other (income) expense, net |
Derivatives not designated as hedging instruments
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
$ (68)
$ 611 
$ (75)
Embedded derivatives |
Other (income) expense, net |
Derivatives not designated as hedging instruments
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
(2)
(1)
(1)
Derivatives designated as cash flow hedges
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(75)
1,480 
(143)
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
717 
261 
36 
Derivatives designated as cash flow hedges |
Foreign Exchange Contract |
Revenue
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
90 
(202)
(48)
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
(88)
(95)
14 
Derivatives designated as cash flow hedges |
Foreign Exchange Contract |
Cost of sales
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(57)
1,109 
(78)
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
586 
220 
12 
Derivatives designated as cash flow hedges |
Foreign Exchange Contract |
Selling and administrative expense
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
0 
0 
4 
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
0 
0 
0 
Derivatives designated as cash flow hedges |
Foreign Exchange Contract |
Other (income) expense, net
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(25)
497 
(21)
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
219 
136 
10 
Derivatives designated as cash flow hedges |
Interest rate swaps |
Interest (income) expense, net
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
(83)
76 
0 
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
0 
0 
0 
Derivatives designated as net investment hedges |
Foreign Exchange Contract |
Other (income) expense, net
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
0 
0 
0 
Amount of Gain (Loss) Reclassified From Accumulated Other Comprehensive Income into Income
0 
0 
0 
Derivatives designated as fair value hedges |
Interest rate swaps |
Interest (income) expense, net
 
 
 
Derivative Instruments, Gain (Loss) [Line Items]
 
 
 
Amount of Gain (Loss) Recognized in Income on Derivatives
$ 2 
$ 5 
$ 5 
Operating Segments and Related Information - Information by Operating Segments (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
$ 32,376 
$ 30,601 
$ 27,799 
Earnings Before Interest and Taxes
4,642 
4,233 
3,577 
Interest expense (income), net
19 
28 
33 
Income before income taxes
4,623 
4,205 
3,544 
Additions to Long-lived Assets
1,191 
1,003 
922 
Depreciation
649 
606 
518 
Corporate
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
(86)
(82)
3 
Earnings Before Interest and Taxes
(1,173)
(1,097)
(1,036)
Additions to Long-lived Assets
312 
144 
161 
Depreciation
84 
75 
54 
NIKE Brand
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
30,507 
28,701 
26,112 
Earnings Before Interest and Taxes
5,328 
4,813 
4,117 
Additions to Long-lived Assets
840 
790 
731 
Depreciation
538 
513 
448 
NIKE Brand |
Global Brand Divisions
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
73 
115 
125 
Earnings Before Interest and Taxes
(2,596)
(2,267)
(1,993)
Additions to Long-lived Assets
258 
225 
225 
Depreciation
230 
210 
175 
NIKE Brand |
North America
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
14,764 
13,740 
12,299 
Earnings Before Interest and Taxes
3,763 
3,645 
3,077 
Additions to Long-lived Assets
242 
208 
240 
Depreciation
133 
121 
109 
NIKE Brand |
Western Europe
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
5,884 
5,705 
4,979 
Earnings Before Interest and Taxes
1,434 
1,275 
855 
Additions to Long-lived Assets
215 
216 
120 
Depreciation
72 
75 
71 
NIKE Brand |
Central & Eastern Europe
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
1,431 
1,421 
1,387 
Earnings Before Interest and Taxes
289 
249 
279 
Additions to Long-lived Assets
17 
20 
19 
Depreciation
12 
12 
11 
NIKE Brand |
Greater China
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
3,785 
3,067 
2,602 
Earnings Before Interest and Taxes
1,372 
993 
816 
Additions to Long-lived Assets
44 
69 
63 
Depreciation
48 
46 
38 
NIKE Brand |
Japan
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
869 
755 
771 
Earnings Before Interest and Taxes
174 
100 
131 
Additions to Long-lived Assets
13 
15 
9 
Depreciation
18 
22 
19 
NIKE Brand |
Emerging Markets
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
3,701 
3,898 
3,949 
Earnings Before Interest and Taxes
892 
818 
952 
Additions to Long-lived Assets
51 
37 
55 
Depreciation
25 
27 
25 
Converse
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
Net Revenue
1,955 
1,982 
1,684 
Earnings Before Interest and Taxes
487 
517 
496 
Additions to Long-lived Assets
39 
69 
30 
Depreciation
$ 27 
$ 18 
$ 16 
Operating Segments and Related Information - Accounts Receivable Net Inventories and Property Plant and Equipment Net by Operating Segments (Detail) (USD $)
In Millions, unless otherwise specified
May 31, 2016
May 31, 2015
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
$ 3,241 
$ 3,358 
Inventories
4,838 
4,337 
Property, Plant and Equipment, net
3,520 
3,011 
Corporate
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
22 
10 
Inventories
(4)
122 
Property, Plant and Equipment, net
937 
713 
NIKE Brand
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
2,949 
3,090 
Inventories
4,536 
3,978 
Property, Plant and Equipment, net
2,458 
2,176 
NIKE Brand |
Global Brand Divisions
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
76 
88 
Inventories
35 
32 
Property, Plant and Equipment, net
511 
484 
NIKE Brand |
North America
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
1,689 
1,737 
Inventories
2,363 
2,207 
Property, Plant and Equipment, net
742 
632 
NIKE Brand |
Western Europe
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
378 
344 
Inventories
929 
699 
Property, Plant and Equipment, net
589 
451 
NIKE Brand |
Central & Eastern Europe
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
194 
242 
Inventories
210 
169 
Property, Plant and Equipment, net
50 
47 
NIKE Brand |
Greater China
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
74 
84 
Inventories
375 
249 
Property, Plant and Equipment, net
234 
254 
NIKE Brand |
Japan
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
129 
134 
Inventories
146 
94 
Property, Plant and Equipment, net
223 
205 
NIKE Brand |
Emerging Markets
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
409 
461 
Inventories
478 
528 
Property, Plant and Equipment, net
109 
103 
Converse
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Accounts Receivable, net
270 
258 
Inventories
306 
237 
Property, Plant and Equipment, net
$ 125 
$ 122 
Operating Segments and Related Information - Revenues by Major Product Line (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Revenue from External Customer [Line Items]
 
 
 
Revenues
$ 32,376 
$ 30,601 
$ 27,799 
Footwear
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Revenues
19,871 
18,318 
16,208 
Apparel
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Revenues
9,067 
8,637 
8,109 
Equipment
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Revenues
1,496 
1,631 
1,670 
Other
 
 
 
Revenue from External Customer [Line Items]
 
 
 
Revenues
$ 1,942 
$ 2,015 
$ 1,812 
Operating Segments and Related Information - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
customer
May 31, 2015
customer
May 31, 2014
customer
Sales Revenue, Net
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Number of customers exceeding risk threshold
0 
0 
0 
Concentration risk percentage
10.00% 
 
 
UNITED STATES
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Revenue
$ 15,304 
$ 14,180 
$ 12,711 
Long-lived assets attributable to operations (Domestic)
2,241 
1,877 
 
Japan
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Long-lived assets attributable to operations (Domestic)
223 
205 
 
BELGIUM
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Long-lived assets attributable to operations (Domestic)
348 
234 
 
CHINA
 
 
 
Regional Reporting Disclosure [Line Items]
 
 
 
Long-lived assets attributable to operations (Domestic)
$ 240 
$ 267 
 
SCHEDULE II - Valuation and Qualifying Accounts (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
May 31, 2016
May 31, 2015
May 31, 2014
Allowance for Sales Returns
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Balance at Beginning of Period
$ 379 
$ 308 
$ 241 
Charged to Costs and Expenses
788 
726 
619 
Charged to Other Accounts
(15)
(35)
(3)
Write-Offs, Net
(708)
(620)
(549)
Balance at End of Period
444 
379 
308 
Allowance for Doubtful Accounts
 
 
 
Movement in Valuation Allowances and Reserves [Roll Forward]
 
 
 
Balance at Beginning of Period
78 
78 
104 
Charged to Costs and Expenses
52 
35 
13 
Charged to Other Accounts
(2)
(15)
(2)
Write-Offs, Net
(85)
(20)
(37)
Balance at End of Period
$ 43 
$ 78 
$ 78