Johnson and Johnson 2014 Annual Report Download - page 48

The unrecognized tax benefits of $2.5 billion at December 28, 2014, if recognized, would affect the Company’s annual
effective tax rate. The Company conducts business and files tax returns in numerous countries and currently has tax audits
in progress with a number of tax authorities. The IRS has completed its audit for the tax years through 2009; however,
there are a limited number of issues remaining open for prior tax years going back to 1999. In other major jurisdictions
where the Company conducts business, the years remain open generally back to the year 2004. The Company believes it
is possible that audits may be completed by tax authorities in some jurisdictions over the next twelve months. However, the
Company is not able to provide a reasonably reliable estimate of the timing of any other future tax payments relating to
uncertain tax positions.
The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities.
Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense. The Company
recognized after tax interest expense of $12 million, $40 million and $41 million in 2014, 2013 and 2012, respectively.
The total amount of accrued interest was $298 million and $412 million in 2014 and 2013, respectively.
9. Employee Related Obligations
At the end of 2014 and 2013, employee related obligations recorded on the Consolidated Balance Sheets were:
(Dollars in Millions) 2014 2013
Pension benefits $4,547 2,950
Postretirement benefits 3,161 2,655
Postemployment benefits 2,062 1,872
Deferred compensation 599 693
Total employee obligations 10,369 8,170
Less current benefits payable 397 386
Employee related obligations – non-current $9,972 7,784
Prepaid employee related obligations of $233 million and $2,363 million for 2014 and 2013, respectively, are included in
other assets on the Consolidated Balance Sheets.
10. Pensions and Other Benefit Plans
The Company sponsors various retirement and pension plans, including defined benefit, defined contribution and
termination indemnity plans, which cover most employees worldwide. The Company also provides post-retirement
benefits, primarily health care, to all eligible U.S. retired employees and their dependents.
Many international employees are covered by government-sponsored programs and the cost to the Company is not
significant.
Retirement plan benefits for employees hired before January 1, 2015 are primarily based on the employee’s compensation
during the last three to five years before retirement and the number of years of service. In 2014, the Company announced
that the U.S. Defined Benefit plan was amended to adopt a new benefit formula, effective for employees hired on or after
January 1, 2015. The benefits are calculated using a new formula based on employee compensation over total years of
service. International subsidiaries have plans under which funds are deposited with trustees, annuities are purchased
under group contracts, or reserves are provided.
The Company does not fund retiree health care benefits in advance and has the right to modify these plans in the future.
The Company uses the date of its consolidated financial statements (December 28, 2014 and December 29, 2013,
respectively) as the measurement date for all U.S. and international retirement and other benefit plans.
38 •Johnson & Johnson 2014 Annual Report