Johnson and Johnson 2015 Annual Report Download - page 56

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Goodwill as of January 3, 2016 and December 28, 2014, as allocated by segment of business, was as follows:
(Dollars in Millions) Consumer Pharmaceutical Med Devices Total
Goodwill at December 29, 2013 $8,531 2,068 12,199 22,798
Goodwill, related to acquisitions 13 665 – 678
Goodwill, related to divestitures (138) – (603) (741)
Currency translation/other (731) (107) (65) (903)
Goodwill at December 28, 2014 $7,675 2,626 11,531 21,832
Goodwill, related to acquisitions 110 366 34 510
Goodwill, related to divestitures (119) (17) (57) (193)
Currency translation/other (426) (86) (8) (520)
Goodwill at January 3, 2016 $7,240 2,889 11,500 21,629
The weighted average amortization periods for patents and trademarks and customer relationships and other intangible
assets are 18 years and 24 years, respectively. The amortization expense of amortizable assets included in cost of
products sold was $1.2 billion, $1.4 billion and $1.4 billion before tax, for the fiscal years ended January 3, 2016,
December 28, 2014 and December 29, 2013, respectively. The estimated amortization expense for the five succeeding
years approximates $1.2 billion before tax, per year. Intangible asset write-downs are included in Other (income) expense,
net.
See Note 20 to the Consolidated Financial Statements for additional details related to acquisitions and divestitures.
6. Fair Value Measurements
The Company uses forward foreign exchange contracts to manage its exposure to the variability of cash flows, primarily
related to the foreign exchange rate changes of future intercompany products and third-party purchases of materials
denominated in a foreign currency. The Company uses cross currency interest rate swaps to manage currency risk
primarily related to borrowings. Both types of derivatives are designated as cash flow hedges.
Additionally, the Company uses interest rate swaps as an instrument to manage interest rate risk related to fixed rate
borrowings. These derivatives are treated as fair value hedges. The Company may use forward foreign exchange contracts
designated as net investment hedges. Additionally, the Company uses forward foreign exchange contracts to offset its
exposure to certain foreign currency assets and liabilities. These forward foreign exchange contracts are not designated as
hedges and therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the
current earnings effect of the related foreign currency assets and liabilities.
The Company does not enter into derivative financial instruments for trading or speculative purposes, or that contain credit
risk related contingent features or requirements to post collateral by either the Company or the counter-party. On an
ongoing basis, the Company monitors counterparty credit ratings. The Company considers credit non-performance risk to
be low, because the Company primarily enters into agreements with commercial institutions that have at least an
investment grade credit rating. Refer to the table on significant financial assets and liabilities measured at fair value
contained in this footnote for receivables and payables with these commercial institutions. As of January 3, 2016, the
Company had notional amounts outstanding for forward foreign exchange contracts, cross currency interest rate swaps
and interest rate swaps of $31.2 billion, $2.3 billion and $2.2 billion, respectively.
All derivative instruments are recorded on the balance sheet at fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income, depending on whether the derivative is
designated as part of a hedge transaction, and if so, the type of hedge transaction.
The designation as a cash flow hedge is made at the entrance date of the derivative contract. At inception, all derivatives
are expected to be highly effective. Changes in the fair value of a derivative that is designated as a cash flow hedge and is
highly effective are recorded in accumulated other comprehensive income until the underlying transaction affects earnings,
and are then reclassified to earnings in the same account as the hedged transaction. Gains and losses associated with
interest rate swaps and changes in fair value of hedged debt attributable to changes in interest rates are recorded to
interest expense in the period in which they occur. Gains and losses on net investment hedges are accounted for through
the currency translation account and are insignificant. On an ongoing basis, the Company assesses whether each
derivative continues to be highly effective in offsetting changes of hedged items. If and when a derivative is no longer
44 •Johnson & Johnson 2015 Annual Report