Johnson and Johnson 2008 Annual Report Download - page 58

12. Accumulated Other Comprehensive Income
Components of other comprehensive income/(loss) consist of
the following:
Total
Unrealized Gains/ Accumulated
Foreign Gains/ (Losses) on Other
Currency (Losses) on Employee Derivatives Comprehensive
(Dollars in Millions) Translation Securities Benefit Plans & Hedges Income/(Loss)
January 1, 2006 $ (520) 70 (320) 15 (755)
2006 changes
Net change due to
hedging transactions —— —17
Net amount reclassed
to net earnings —— —(23)
Net 2006 changes 362 (9) (1,710) (6) (1,363)
December 31, 2006 $ (158) 61 (2,030) 9 (2,118)
2007 changes
Net change due to
hedging transactions —— —(78)
Net amount reclassed
to net earnings —— —24
Net 2007 changes 786 23 670 (54) 1,425
December 30, 2007 $ 628 84 (1,360) (45) (693)
2008 changes
Net change due to
hedging transactions —— —94
Netamount reclassed
to net earnings —— —72
Net2008 changes (2,499) (59) (1,870) 166 (4,262)
December 28, 2008 $(1,871) 25 (3,230) 121 (4,955)
Total comprehensive income for 2008 includes reclassification
adjustment gains of $41million realized from the sale of equity
securities and the associated tax expense of $14 million.
Total comprehensiveincome for 2007 includes reclassification
adjustment gains of $7 million realized from the sale of equity
securities and the associated tax expense of $2 million.
Total other comprehensiveincome for 2006 includes reclassi-
fication adjustment gains of $13 million realized from the sale of
equity securities and the associated tax expense of $4 million.
The tax effect on the unrealized gains/(losses) on the equity
securities was an expense of $14 million, $46 million and $33 mil-
lion in 2008, 2007 and 2006, respectively. The tax effect related to
employee benefit plans was $1,090 million, $349 million and $891
million in 2008, 2007 and 2006, respectively. The tax effect on the
gains/(losses) on derivatives and hedges are losses of $70 million
in 2008, gains of $24 million in 2007, and losses of $4 million in
2006. 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 Com-
pany also provides postretirement benefits, primarily health care, to
all 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 are primarily based on the employee’s
compensation during the last three to five years before retirement
and the number of 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 Companydoes not fund retiree health carebenefits in
advance and has the right to modify these plans in the future.
The Company uses the date of its consolidated financial state-
ments (December 28, 2008 and December 30, 2007, respectively)
as the measurement date for all U.S. and international retirement
and other benefit plans.
In September 2006, Statement of Financial Accounting Stan-
dards (SFAS)No.158, Employers’ Accounting for Defined Benefit Pen-
sion and Other Postretirement Plans was issued and amends further
the disclosure requirements for pensions and other postretirement
benefits. This Statement was an amendment of FASB Statements
No. 87, 88, 106 and 132(R). The incremental effect of applying FASB
No.158 was a $1.7 billion reduction in Shareholder Equity, net of
deferred taxes.
56 JOHNSON & JOHNSON 2008 ANNUAL REPORT