Johnson and Johnson 2005 Annual Report Download - page 53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PAGE 51
12. ACCUMULATED OTHER COMPREHENSIVE INCOME
Components of other comprehensive income/(loss) consist of
the following:
Total
Unrealized Gains/ Accumulated
Foreign Gains/ Pension (Losses) on Other
Currency (Losses) on Liability Derivatives Comprehensive
(Dollars in Millions) Translation Securities Adjustments & Hedges Income/(Loss)
Dec. 29, 2002 $(707) (2) (33) (100) (842)
2003 changes
Net change due to
hedging transactions — — — (567)
Net amount reclassed
to net earnings — — — 487
Net 2003 changes 334 29 (31) (80) 252
Dec. 28, 2003 $(373) 27 (64) (180) (590)
2004 changes
Net change due to
hedging transactions — — — 15
Net amount reclassed
to net earnings — — — 15
Net 2004 changes 268 59 (282) 30 75
Jan. 2, 2005 $(105) 86 (346) (150) (515)
2005 changes
Net change due to
hedging transactions — — — 112
Net amount reclassed
to net earnings — — — 53
Net 2005 changes (415) (16) 26 165 (240)
Jan. 1, 2006 $(520) 70 (320) 15 (755)
Total other comprehensive income for 2005 includes reclassifi-
cation adjustment gains of $23 million realized from the sale of
equity securities and the associated tax expense of $8 million.
Total other comprehensive income for 2004 includes reclassifi-
cation adjustment gains of $16 million realized from the sale of
equity securities and the associated tax expense of $6 million.
Total other comprehensive income for 2003 includes reclassifi-
cation adjustment gains of $3 million realized from the sale of
equity securities and the associated tax expense of $1 million.
The tax effect on the unrealized gains/(losses) on the equity
securities balance is an expense of $38 million, $47 million and
$15 million in 2005, 2004 and 2003, respectively. The tax effect
related to the minimum pension liability was $160 million in
2005. The tax effect on the gains/(losses) on derivatives and
hedges are a loss of $11 million in 2005 and benefits of $81 mil-
lion and $99 million in 2004 and 2003, respectively. See Note 15
for additional information relating to derivatives and hedging.
The currency translation adjustments are not currently
adjusted for income taxes as they relate to permanent
investments in international subsidiaries.
13. 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 postretirement bene-
fits, primarily health care, to all U.S. retired employees and
their dependents.
Many international employees are covered by government-
sponsored programs for which the direct cost to the Company
is not significant.
Retirement plan benefits are primarily based on the
employee’s compensation during the last three to five years
before retirement and the number of years of service. Interna-
tional 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 (January 1, 2006 and January 2, 2005, respectively)
as the measurement date for all U.S. and international retire-
ment and other benefit plans.
Net periodic benefit cost for the Company’s defined benefit
retirement plans and other benefit plans for 2005, 2004 and
2003 included the following components:
Retirement Plans Other Benefit Plans
(Dollars in Millions) 2005 2004 2003 2005 2004 2003
Service cost $ 462 409 325 $ 56 56 28
Interest cost 488 444 391 87 91 70
Expected return on plan assets (579) (529) (495) (3) (3) (3)
Amortization of prior service cost 12 15 18 (7) (4) (3)
Amortization of net transition asset (2) (3) (4) — — —
Recognized actuarial losses 219 173 109 25 27 3
Curtailments and settlements 2 3 1 — — —
Special termination benefits — — 95 — — —
Net periodic benefit cost $ 602 512 440 $158 167 95