Johnson and Johnson 2015 Annual Report Download - page 37

Medical Devices Segment
(Dollars in Millions)
Balance at
Beginning of
Period Accruals
Payments/
Credits
Balance at
End of
Period
2015
Accrued rebates (1) $844 5,216 (4,871) 1,189
Accrued returns 188 556 (505) 239
Accrued promotions 53 95 (101) 47
Subtotal $1,085 5,867 (5,477) 1,475
Reserve for doubtful accounts 216 13 (25) 204
Reserve for cash discounts 16 877 (873) 20
Total $1,317 6,757 (6,375) 1,699
2014
Accrued rebates (1) $801 4,663 (4,620) 844
Accrued returns 180 395 (387) 188
Accrued promotions 66 35 (48) 53
Subtotal $1,047 5,093 (5,055) 1,085
Reserve for doubtful accounts 213 62 (59) 216
Reserve for cash discounts 18 815 (817) 16
Total $1,278 5,970 (5,931) 1,317
(1) Includes reserve for customer rebates of $411 million at January 3, 2016 and $354 million at December 28, 2014, recorded as a
contra asset.
Income Taxes: Income taxes are recorded based on amounts refundable or payable for the current year and include the
results of any difference between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities.
The Company estimates deferred tax assets and liabilities based on enacted tax regulations and rates. Future changes in
tax laws and rates may affect recorded deferred tax assets and liabilities.
The Company has unrecognized tax benefits for uncertain tax positions. The Company follows U.S. GAAP, which
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Management believes that changes in these estimates would
not have a material effect on the Company’s results of operations, cash flows or financial position.
At January 3, 2016 and December 28, 2014, the cumulative amounts of undistributed international earnings were
approximately $58.0 billion and $53.4 billion, respectively. At January 3, 2016 and December 28, 2014, the Company’s
foreign subsidiaries held balances of cash, cash equivalents and marketable securities in the amounts of $38.2 billion and
$32.9 billion, respectively. The Company has not provided deferred taxes on the undistributed earnings from certain
international subsidiaries where the earnings are considered to be permanently reinvested. The Company intends to
continue to reinvest these earnings in international operations. If the Company decided at a later date to repatriate these
earnings to the U.S., the Company would be required to provide for the net tax effects on these amounts. The Company
does not determine the deferred tax liability associated with these undistributed earnings, as such determination is not
practical.
See Note 8 to the Consolidated Financial Statements for further information regarding income taxes.
Legal and Self Insurance Contingencies: The Company records accruals for various contingencies, including legal
proceedings and product liability claims as these arise in the normal course of business. The accruals are based on
management’s judgment as to the probability of losses and, where applicable, actuarially determined estimates. The
Company has self insurance through a wholly-owned captive insurance company. In addition to accruals in the self
insurance program, claims that exceed the insurance coverage are accrued when losses are probable and amounts can be
reasonably estimated. Additionally, the Company records insurance receivable amounts from third-party insurers when
recovery is probable. As appropriate, reserves against these receivables are recorded for estimated amounts that may not
be collected from third-party insurers.
The Company follows the provisions of U.S. GAAP when recording litigation related contingencies. A liability is recorded
when a loss is probable and can be reasonably estimated. The best estimate of a loss within a range is accrued; however,
if no estimate in the range is better than any other, the minimum amount is accrued.
Johnson & Johnson 2015 Annual Report •25