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Requisite Service Period. This standard clarifies the current accounting guidance for entities that issue share-based
payment awards that require a specific performance target be achieved for employees to become eligible to vest in the
awards, which may occur subsequent to a required service period. Current accounting guidance does not explicitly
address how to account for these types of awards. The new standard provides explicit guidance and clarifies that these
types of performance targets should be treated as performance conditions. The accounting for share-based awards with
performance conditions is already specified in current accounting guidance. This update is required to be adopted by all
public companies for all annual periods and interim reporting periods beginning after December 15, 2015. Early adoption
of this standard was permitted and the Company had elected to adopt this standard for the second quarter of 2014. The
adoption of this standard did not have a material impact on the Company’s results of operations, cash flows or financial
position.
Recently Issued Accounting Standards
Not Adopted as of December 28, 2014
During the fiscal second quarter of 2014, the FASB issued Accounting Standards Update 2014-09: Revenue from
Contracts with Customers. This standard replaces substantially all current revenue recognition accounting guidance. This
update is required to be adopted by all public companies for all annual periods and interim reporting periods beginning
after December 15, 2016. Early adoption of this standard is not permitted. The Company is currently assessing the impact
of the future adoption of this standard on its financial statements.
During the fiscal second quarter of 2014, the FASB issued amended guidance Accounting Standards Update No. 2014-
10: Development Stage Entities: Elimination of Certain Financial Reporting Requirements, Including an Amendment to
Variable Interest Entity Guidance in Topic 810, Consolidation. The change in the current guidance will require the
Company to determine if it should consolidate one of these entities based on the change in the consolidation analysis.
This update to the consolidation analysis will become effective for all annual periods and interim reporting periods
beginning after December 15, 2015. The adoption of this standard is not expected to have a material impact on the
presentation of the Company’s results of operations, cash flows or financial position.
During the fiscal third quarter of 2014, the FASB issued Accounting Standards Update No. 2014-15: Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern. This standard requires management to evaluate,
for each annual and interim reporting period, whether there are conditions and events, considered in the aggregate, that
raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date the financial
statements are issued or are available to be issued. If substantial doubt is raised, additional disclosures around
management’s plan to alleviate these doubts are required. This update will become effective for all annual periods and
interim reporting periods beginning after December 15, 2016. This standard is not expected to have any impact on current
disclosures in the financial statements.
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
26 •Johnson & Johnson 2014 Annual Report