Johnson & Johnson (JNJ)

Investment Accounting Policy

Cash Equivalents

Johnson & Johnson considers securities with maturities of three months or less, when purchased, to be cash equivalents.

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 Johnson & Johnson 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. Johnson & Johnson 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.

Source: Johnson & Johnson, Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Johnson & Johnson, adjustment to Net Earnings Attributable To Johnson & Johnson

USD $ in millions

12 months ended	Dec 30, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Net earnings attributable to Johnson & Johnson (as reported)	10,853	9,672	13,334	12,266	12,949
Add: Securities	(253)	424	54	(55)	(59)
Net earnings attributable to Johnson & Johnson (adjusted)	10,600	10,096	13,388	12,211	12,890

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Johnson & Johnson, adjusted ratios

	Dec 30, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Net Profit Margin
Reported net profit margin	16.14%	14.87%	21.65%	19.82%	20.31%
Adjusted net profit margin	15.77%	15.53%	21.74%	19.73%	20.22%
Return on Equity (ROE)
Reported ROE	16.74%	16.94%	23.57%	24.25%	30.46%
Adjusted ROE	16.35%	17.69%	23.66%	24.14%	30.32%
Return on Assets (ROA)
Reported ROA	8.94%	8.51%	12.96%	12.95%	15.25%
Adjusted ROA	8.74%	8.88%	13.01%	12.90%	15.18%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Johnson & Johnson's adjusted net profit margin deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Johnson & Johnson's adjusted ROE deteriorated from 2010 to 2011 and from 2011 to 2012.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Johnson & Johnson's adjusted ROA deteriorated from 2010 to 2011 and from 2011 to 2012.

Adjusted Net Profit Margin

	Dec 30, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net earnings attributable to Johnson & Johnson (USD $ in millions)	10,853	9,672	13,334	12,266	12,949
Sales to customers (USD $ in millions)	67,224	65,030	61,587	61,897	63,747

Net profit margin¹	16.14%	14.87%	21.65%	19.82%	20.31%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings attributable to Johnson & Johnson (USD $ in millions)	10,600	10,096	13,388	12,211	12,890
Sales to customers (USD $ in millions)	67,224	65,030	61,587	61,897	63,747

Adjusted net profit margin²	15.77%	15.53%	21.74%	19.73%	20.22%

2012 Calculations

¹ Net profit margin = 100 × Net earnings attributable to Johnson & Johnson ÷ Sales to customers
= 100 × 10,853 ÷ 67,224 = 16.14%

² Adjusted net profit margin = 100 × Adjusted net earnings attributable to Johnson & Johnson ÷ Sales to customers
= 100 × 10,600 ÷ 67,224 = 15.77%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Johnson & Johnson's adjusted net profit margin deteriorated from 2010 to 2011 but then slightly improved from 2011 to 2012.

Adjusted Return On Equity (ROE)

	Dec 30, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net earnings attributable to Johnson & Johnson (USD $ in millions)	10,853	9,672	13,334	12,266	12,949
Shareholders’ equity (USD $ in millions)	64,826	57,080	56,579	50,588	42,511

ROE¹	16.74%	16.94%	23.57%	24.25%	30.46%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings attributable to Johnson & Johnson (USD $ in millions)	10,600	10,096	13,388	12,211	12,890
Shareholders’ equity (USD $ in millions)	64,826	57,080	56,579	50,588	42,511

Adjusted ROE²	16.35%	17.69%	23.66%	24.14%	30.32%

2012 Calculations

¹ ROE = 100 × Net earnings attributable to Johnson & Johnson ÷ Shareholders’ equity
= 100 × 10,853 ÷ 64,826 = 16.74%

² Adjusted ROE = 100 × Adjusted net earnings attributable to Johnson & Johnson ÷ Shareholders’ equity
= 100 × 10,600 ÷ 64,826 = 16.35%

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Johnson & Johnson's adjusted ROE deteriorated from 2010 to 2011 and from 2011 to 2012.

Adjusted Return On Assets (ROA)

	Dec 30, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net earnings attributable to Johnson & Johnson (USD $ in millions)	10,853	9,672	13,334	12,266	12,949
Total assets (USD $ in millions)	121,347	113,644	102,908	94,682	84,912

ROA¹	8.94%	8.51%	12.96%	12.95%	15.25%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings attributable to Johnson & Johnson (USD $ in millions)	10,600	10,096	13,388	12,211	12,890
Total assets (USD $ in millions)	121,347	113,644	102,908	94,682	84,912

Adjusted ROA²	8.74%	8.88%	13.01%	12.90%	15.18%

2012 Calculations

¹ ROA = 100 × Net earnings attributable to Johnson & Johnson ÷ Total assets
= 100 × 10,853 ÷ 121,347 = 8.94%

² Adjusted ROA = 100 × Adjusted net earnings attributable to Johnson & Johnson ÷ Total assets
= 100 × 10,600 ÷ 121,347 = 8.74%

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Johnson & Johnson's adjusted ROA deteriorated from 2010 to 2011 and from 2011 to 2012.