Johnson and Johnson 2013 Annual Report Download - page 36

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Recently Issued Accounting Standards
Not Adopted as of December 29, 2013
During the fiscal first quarter of 2013, the FASB issued amended guidance clarifying the release of accumulated Foreign
Currency Translation from other comprehensive income (OCI) into current year Net Earnings. The amendment requires
that when the parent company ceases to have a controlling interest in a subsidiary or a business within a foreign entity the
parent is to release accumulated Foreign Currency Translation from OCI. This update is required to be adopted for all
annual periods and interim reporting periods beginning after December 15, 2013, with early adoption permitted. The
adoption of this standard is not expected to have a material impact on the Company’s results of operations, cash flows or
financial position.
During the fiscal third quarter of 2013, the FASB issued clarifying guidance on the presentation of unrecognized tax
benefits when various qualifying tax credits exist. The amendment requires that unrecognized tax benefits be presented on
the Consolidated Balance Sheet as a reduction to deferred tax assets created by net operating losses or other tax credits
from prior periods that occur in the same taxing jurisdiction. To the extent that the unrecognized tax benefit exceeds these
credits, it shall be presented as a liability. This update is required to be adopted for all annual periods and interim reporting
periods beginning after December 15, 2013, with early adoption permitted. The adoption of this standard is not expected
to have a material impact on the presentation of the Company’s financial position.
Cash Equivalents
The Company classifies all highly liquid investments with stated maturities of three months or less from date of purchase
as cash equivalents and all highly liquid investments with stated maturities of greater than three months from the date of
purchase as current marketable securities. The Company has a policy of making investments only with commercial
institutions that have at least an “A” (or equivalent) credit rating. The Company invests its cash primarily in reverse
repurchase agreements (RRAs), government securities and obligations, corporate debt securities and money market
funds.
RRAs are collateralized by deposits in the form of ‘Government Securities and Obligations’ for an amount not less than
102% of their value. The Company does not record an asset or liability as the Company is not permitted to sell or
repledge the associated collateral. The Company has a policy that the collateral has at least an A (or equivalent) credit
rating. The Company utilizes a third party custodian to manage the exchange of funds and ensure that collateral received is
maintained at 102% of the value of the RRAs on a daily basis. RRAs with stated maturities of greater than three months
from the date of purchase are classified as marketable securities.
Investments
Short-term marketable securities are carried at cost, which approximates fair value. Investments classified as available-for-
sale are carried at estimated fair value with unrealized gains and losses recorded as a component of accumulated other
comprehensive income. Long-term debt securities that the Company has the ability and intent to hold until maturity are
carried at amortized cost. Management determines the appropriate classification of its investment in debt and equity
securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company
periodically reviews its investments in equity securities for impairment and adjusts these investments to their fair value
when a decline in market value is deemed to be other than temporary. If losses on these securities are considered to be
other than temporary, the loss is recognized in earnings.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. The Company utilizes the straight-line method of depreciation over the
estimated useful lives of the assets:
Building and building equipment 20 - 30 years
Land and leasehold improvements 10 - 20 years
Machinery and equipment 2 - 13 years
The Company capitalizes certain computer software and development costs, included in machinery and equipment, when
incurred in connection with developing or obtaining computer software for internal use. Capitalized software costs are
amortized over the estimated useful lives of the software, which generally range from 3 to 8 years.
26 •Johnson & Johnson 2013 Annual Report