a The company I chose for the 10-K Annual Report is NIKE, Inc. Any business is subject
to various legal proceedings, claims, and government investigations that is related to its
business. There is no company that can predict the outcome of these pending matters.
NIKE has received claims for certain years from the Belgian Customs Authorities. This is
technically for alleged underpaid duties that are related to products imported in the fiscal
year 2018. Edgar Entity Landing Page. (n.d.). The company has disputed these claims and
started the process. At this time, its NIKE is unable to estimate the range of loss and
cannot predict the outcome. This resolution could take several years on this matter. NIKE
will have a huge negative effect on the cash flows if this company this matter is resolved
against NIKE. The foreign exchange derivative instruments are shown on the balance
sheet under assets and liabilities. These instruments are recorded as a fair value showing
the gain or loss within the balance sheet. If the foreign exchange was earned on the lance
sheet the liabilities would have been reduced by $43 million. The company received $962
million of cash from counterparties that are related to foreign exchange instruments for
August 31, 2022. There was no amount for the liabilities balance as of August 31, 2022.
Edgar Entity Landing Page. (n.d.). At the end of the fiscal year of 2022, the company sold
entities to Argentina, Uruguay, and Chile, to third part distributors. It was shown on the
balance sheet that there was a held-for sale with prepaid expenses and other assets and
liabilities until this transaction is closed.
a a a Contingent liabilities are the amount that the company owes to whether an event
will occur. The most common source is outstanding lawsuits and products warranties.
Management would disclose all the contingent liabilities to their auditors. This is not a
common thing, but auditors should investigate different procedures after an inquiry. It is
important that auditors are very attention to any legal expense that is referring to the
accounting system. One of the procedures that auditors use to search for liabilities is
evaluating the materiality. Messier, W. F., (2019.) The auditors must assess the materiality
of the continent liabilities which is prior to considering the specifics. Auditors should
estimate the likelihood that an event will occur.
Sources:
Messier, W. F., Glover, S. M., & Prawitt, D. F. (2019). Auditing & Assurance Services: A
systematic approach. McGraw-Hill Education.
Edgar Entity Landing Page. (n.d.). Retrieved October 13, 2022, from
https://www.sec.gov/edgar/browse/?CIK=320187&owner=exclude
