Johnson and Johnson 2015 Annual Report Download - page 49

During the fiscal second quarter of 2015, the FASB issued Accounting Standard Update 2015-03: Simplifying the
Presentation of Debt Issuance Costs. This update requires capitalized debt issuance costs to be presented as a reduction
to the carrying value of debt instead of being classified as a deferred charge, as currently required. This update will be
effective for the Company for all annual and interim periods beginning after December 15, 2015 and is required to be
applied retroactively for all periods presented. This update will not have a material impact on the presentation of the
Company’s financial position.
During the fiscal second quarter of 2015, the FASB issued Accounting Standard Update 2015-11: Simplifying the
Measurement of Inventory. This update requires inventory to be measured at the lower of cost or net realizable value. Net
realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of
completion, disposal and transportation. This update will be effective for the Company for all annual and interim periods
beginning after December 15, 2016. The amendments in this update should be applied prospectively with earlier
application permitted as of the beginning of an interim or annual reporting period. This update will not have a material
impact on the presentation of the Company’s financial position.
During the fiscal third quarter of 2015, the FASB issued Accounting Standard Update 2015-16 Business Combinations:
Simplifying the Accounting for Measurement-Period Adjustments. The amendments in this update require that an acquirer
recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in
which the adjustment amounts are determined. This update will be effective for the Company for all annual and interim
periods beginning after December 15, 2015. The amendments in this update should be applied prospectively to
adjustments to provisional amounts that occur after the effective date of this update with earlier application permitted for
financial statements that have not been issued. This update is not expected to have a material impact on the Company’s
consolidated financial statements.
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.
During the fiscal third quarter of 2015, the FASB approved a one year deferral to the effective date to be adopted by all
public companies for all annual periods and interim reporting periods beginning after December 15, 2017. Early adoption
of this standard is permitted but not before the original effective date for all annual periods and interim reporting periods
beginning after December 15, 2016. 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 consolidated financial statements.
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 ending 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 investment grade 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
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