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Day 4

Revenue Recognition (Part 1)

In today’s lesson we cover the concept of revenue recognition. It’s important to know that revenue is not the same as cash. It can be confusing, but we’ve got you covered. This 1 minute video explains it simply. After watching the video below, scroll down to the bottom for your homework.

Your Homework

NIKE sold more than 35 million pairs of shoes at an average retail price of $110 through their website during December 2022. NIKE's manufacturing suppliers were backed up due to the Christmas rush and delivery of shoes prevented 5M pairs of shoes from arriving to consumers until Jan 2023. How much revenue will NIKE be able to recognize in Dec and why?

Scroll down to see the answer.


NIKE will be able to recognize $3,300M of digital sales in December 2022. $550M will not be recognized as revenue until January of 2023. Even though NIKE received cash upfront in the amount $3,850M for the 35M pairs it sold, it didn't meet the delivery requirement for 5M pairs so NIKE is not allowed to recognize the full amount in December.

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