Johnson and Johnson 2012 Annual Report Download - page 24

Medical Devices and Diagnostics Segment
(Dollars in Millions)
Balance at
Beginning of
Period Accruals
Payments/
Credits
Balance at
End of
Period
2012
Accrued rebates(1) $497 3,803 (3,733) 567
Accrued returns 184 369 (348) 205
Accrued promotions 73 49 (62) 60
Subtotal $754 4,221 (4,143) 832
Reserve for doubtful accounts 161 74 2 237
Reserve for cash discounts 32 371 (381) 22
Total $947 4,666 (4,522) 1,091
2011
Accrued rebates(1) $495 3,253 (3,251) 497
Accrued returns 201 352 (369) 184
Accrued promotions 50 67 (44) 73
Subtotal $746 3,672 (3,664) 754
Reserve for doubtful accounts 138 54 (31) 161
Reserve for cash discounts 35 342 (345) 32
Total $919 4,068 (4,040) 947
(1) Includes reserve for customer rebates of $340 million at December 30, 2012 and $324 million at January 1, 2012, 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 current tax regulations and rates. 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 December 30, 2012 and January 1, 2012, the cumulative amounts of undistributed international earnings were
approximately $49.0 billion and $41.6 billion, respectively. At December 30, 2012 and January 1, 2012, the Company’s
foreign subsidiaries held balances of cash and cash equivalents in the amounts of $14.8 billion and $24.5 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 and is insured up to certain limits. 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.
16 •Johnson & Johnson 2012 Annual Report