Johnson and Johnson 2015 Annual Report Download - page 53

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For all years presented, there was no individual project that represented greater than 5% of the total annual consolidated
research and development expense.
The Company has a number of products and compounds developed in collaboration with strategic partners including
XARELTO®, co-developed with Bayer HealthCare AG and IMBRUVICA®, developed in collaboration and co-marketed
with Pharmacyclics LLC, an AbbVie company.
Advertising
Costs associated with advertising are expensed in the year incurred and are included in selling, marketing and
administrative expenses. Advertising expenses worldwide, which comprised television, radio, print media and Internet
advertising, were $2.5 billion, $2.6 billion and $2.5 billion in 2015, 2014 and 2013, respectively.
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 in the future.
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.
Net Earnings Per Share
Basic earnings per share is computed by dividing net earnings available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could
occur if securities were exercised or converted into common stock using the treasury stock method.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions that affect the amounts reported. Estimates are used when
accounting for sales discounts, rebates, allowances and incentives, product liabilities, income taxes, depreciation,
amortization, employee benefits, contingencies and intangible asset and liability valuations. Actual results may or may not
differ from those estimates.
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.
Annual Closing Date
The Company follows the concept of a fiscal year, which ends on the Sunday nearest to the end of the month of
December. Normally each fiscal year consists of 52 weeks, but every five or six years the fiscal year consists of 53 weeks,
as was the case in 2015, and will be the case again in 2020.
Johnson & Johnson 2015 Annual Report •41