Johnson and Johnson 2012 Annual Report Download - page 45

Download and view the complete annual report

Please find page 45 of the 2012 Johnson and Johnson annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 83

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83

Temporary differences and carryforwards for 2012 and 2011 were as follows:
2012
Deferred Tax
2011
Deferred Tax
(Dollars in Millions) Asset Liability Asset Liability
Employee related obligations $3,343 3,028
Stock based compensation 1,199 1,358
Depreciation (933) (865)
Non-deductible intangibles (6,261) (2,997)
International R&D capitalized for tax 1,599 1,509
Reserves & liabilities 1,908 1,527
Income reported for tax purposes 726 903
Net operating loss carryforward international 1,117 1,183
Miscellaneous international 1,291 (371) 1,261 (422)
Miscellaneous U.S. 915 817
Total deferred income taxes $12,098 (7,565) 11,586 (4,284)
The difference between the net deferred tax on income per the balance sheet and the net deferred tax above is included in
taxes on income on the balance sheet. The Company has wholly-owned international subsidiaries that have cumulative net
losses. The Company believes that it is more likely than not that these subsidiaries will realize future taxable income
sufficient to utilize these deferred tax assets.
The following table summarizes the activity related to unrecognized tax benefits:
(Dollars in Millions) 2012 2011 2010
Beginning of year $2,699 2,307 2,403
Increases related to current year tax positions 538 402 465
Increases related to prior period tax positions 57 87 68
Decreases related to prior period tax positions (41) (77) (431)
Settlements (120) (16) (186)
Lapse of statute of limitations (79) (4) (12)
End of year $3,054 2,699 2,307
The unrecognized tax benefits of $3.1 billion at December 30, 2012, if recognized, would affect the Company’s annual
effective tax rate. The Company conducts business and files tax returns in numerous countries and currently has tax audits
in progress with a number of tax authorities. The U.S. Internal Revenue Service (IRS) has completed its audit for the tax
years through 2005; however, there are a limited number of issues remaining open for prior tax years going back to 1999.
In other major jurisdictions where the Company conducts business, the years remain open generally back to the year
2003. The Company believes it is possible that audits may be completed by tax authorities in some jurisdictions over the
next twelve months. However, the Company is not able to provide a reasonably reliable estimate of the timing of any other
future tax payments relating to uncertain tax positions.
The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities.
Interest expense and penalties related to unrecognized tax benefits are classified as income tax expense. The Company
recognized after tax interest of $41 million expense, $47 million expense and $34 million income in 2012, 2011 and 2010,
respectively. The total amount of accrued interest was $422 million and $350 million in 2012 and 2011, respectively.
Johnson & Johnson 2012 Annual Report •37