Johnson and Johnson 2014 Annual Report Download - page 35

Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Johnson & Johnson and its subsidiaries (the Company).
Intercompany accounts and transactions are eliminated.
Description of the Company and Business Segments
The Company has approximately 126,500 employees worldwide engaged in the research and development, manufacture
and sale of a broad range of products in the health care field. The Company conducts business in virtually all countries of
the world and its primary focus is on products related to human health and well-being.
The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices (previously
referred to as Medical Devices and Diagnostics). The Consumer segment includes a broad range of products used in the
baby care, oral care, skin care, over-the-counter pharmaceutical, women’s health and wound care markets. These
products are marketed to the general public and sold both to retail outlets and distributors throughout the world. The
Pharmaceutical segment is focused on five therapeutic areas, including immunology, infectious diseases, neuroscience,
oncology, and cardiovascular and metabolic diseases. Products in this segment are distributed directly to retailers,
wholesalers, hospitals and health care professionals for prescription use. The Medical Devices segment includes a broad
range of products used in the orthopaedic, surgical care, specialty surgery, cardiovascular care, diagnostics, diabetes
care, and vision care markets, which are distributed to wholesalers, hospitals and retailers, and used principally in the
professional fields by physicians, nurses, hospitals, and clinics.
New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
During the fiscal first quarter of 2014, the Company adopted the Financial Accounting Standards Board (FASB) guidance
clarifying the release of accumulated Foreign Currency Translation from other comprehensive income (OCI), into current
year Net Earnings. The amendment requires that when the parent company ceases to have a controlling interest in a
subsidiary or a business within a foreign entity the parent is to release accumulated Foreign Currency Translation from
OCI. This update became effective for all annual periods and interim reporting periods beginning after December 15,
2013. The adoption of this standard did not have a material impact on the Company’s results of operations, cash flows or
financial position.
During the fiscal first quarter of 2014, the Company adopted the FASB guidance on the presentation of unrecognized tax
benefits when various qualifying tax credits exist. The amendment requires that unrecognized tax benefits be presented on
the Consolidated Balance Sheet as a reduction to deferred tax assets created by net operating losses or other tax credits
from prior periods that occur in the same taxing jurisdiction. To the extent that the unrecognized tax benefit exceeds these
credits, it shall be presented as a liability. This update became effective for all annual periods and interim reporting periods
beginning after December 15, 2013. The adoption of this standard did not have a material impact on the presentation of
the Company’s financial position.
During the fiscal second quarter of 2014, the FASB issued amended guidance on the use and presentation of
discontinued operations in an entity’s financial statements. The new guidance restricts the presentation of discontinued
operations to business circumstances when the disposal of business operations represents a strategic shift that has or will
have a major effect on an entity’s operations and financial results. Examples of a strategic shift could include, but not be
limited to, disposal of major geographic segments, a major line of business or other major business component of an
entity. The new guidance also expands the required disclosures for entities that have assets held for sale but do not meet
the new definition of discontinued operations. This amendment includes early adoption provisions allowing the Company
to implement this update immediately for the first quarter of 2014. The Company elected to adopt this standard for the first
quarter of 2014. The balances and updated disclosures required by the amended guidance are included in Note 20 in the
Notes to the Consolidated Financial Statements.
During the fiscal second quarter of 2014, the FASB issued Accounting Standards Update 2014-12: Accounting for
Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the
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