Johnson and Johnson 2012 Annual Report Download - page 78

Management’s Report on Internal Control
Over Financial Reporting
Under Section 404 of the Sarbanes-Oxley Act of 2002, management is required to assess the effectiveness of the
Company’s internal control over financial reporting as of the end of each fiscal year and report, based on that assessment,
whether the Company’s internal control over financial reporting is effective.
Management of the Company is responsible for establishing and maintaining adequate internal control over financial
reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance as to the
reliability of the Company’s financial reporting and the preparation of external financial statements in accordance with
generally accepted accounting principles.
Internal controls over financial reporting, no matter how well designed, have inherent limitations. Therefore, internal control
over financial reporting determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management has assessed the effectiveness of the Company’s internal control over financial reporting as
of December 30, 2012. In making this assessment, the Company used the criteria established by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework”. These
criteria are in the areas of control environment, risk assessment, control activities, information and communication and
monitoring. The Company’s assessment included extensive documenting, evaluating and testing the design and operating
effectiveness of its internal controls over financial reporting.
The Company acquired Synthes, Inc., and its consolidated subsidiaries (Synthes) in June 2012. Synthes total assets,
which were primarily intangible assets and goodwill, and total revenues represented approximately 17% and 3%,
respectively, of the related consolidated financial statements as of and for the period ended December 30, 2012. As the
acquisition occurred in June 2012 and Synthes was previously not subject to the requirements under Section 404 of the
Sarbanes-Oxley Act of 2002, the scope of the Company’s assessment of the design and effectiveness of internal control
over financial reporting for the fiscal year 2012 excluded Synthes. This exclusion is in accordance with the SEC’s general
guidance that an assessment of a recently acquired business may be omitted from the scope in the year of acquisition.
Based on the Company’s processes and assessment, as described above, management has concluded that, as of
December 30, 2012, the Company’s internal control over financial reporting was effective.
The effectiveness of the Company’s internal control over financial reporting as of December 30, 2012 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears
herein.
Alex Gorsky Dominic J. Caruso
Chairman, Board of Directors Vice President, Finance
Chief Executive Officer Chief Financial Officer
70 •Johnson & Johnson 2012 Annual Report