Johnson & Johnson (JNJ) | Analysis of Income Taxes

Income Tax Accounting Policy

Income taxes are recorded based on amounts refundable or payable for the current year and include the results of any difference between U.S. GAAP accounting and tax reporting, recorded as deferred tax assets or liabilities. Johnson & Johnson estimates deferred tax assets and liabilities based on current tax regulations and rates. Changes in tax laws and rates may affect recorded deferred tax assets and liabilities in the future. Management believes that changes in these estimates would not have a material effect on Johnson & Johnson's results of operations, cash flows or financial position.

At January 1, 2012 and January 2, 2011, the cumulative amounts of undistributed international earnings were approximately $41.6 billion and $37.0 billion, respectively. At January 1, 2012 and January 2, 2011, Johnson & Johnson's foreign subsidiaries held balances of cash and cash equivalents in the amounts of $24.5 billion and $18.7 billion, respectively. Johnson & Johnson intends to continue to reinvest its undistributed international earnings to expand its international operations; therefore, no U.S. tax expense has been recorded with respect to the undistributed portion not intended for repatriation.

Source: Johnson & Johnson, Annual Report

Income Tax Expense (Benefit)

Johnson & Johnson, income tax expense (benefit), continuing operations

Source: Based on data from Johnson & Johnson Annual Reports

Item	Description	The company
Currently payable	The component of income tax expense for the period representing amounts of income taxes paid or payable (or refundable) for the period for all income tax obligations as determined by applying the provisions of relevant enacted tax laws to relevant amounts of taxable income (loss) from continuing operations.	Johnson & Johnson's currently payable declined from 2009 to 2010 but then slightly increased from 2010 to 2011.
Deferred	The component of income tax expense for the period representing the net change in the entity's deferred tax assets and liabilities pertaining to continuing operations.	Johnson & Johnson's deferred increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
Provision for taxes on income	The sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to pretax income (loss) from continuing operations; income tax expense (benefit) may include interest and penalties on tax uncertainties based on the entity's accounting policy.	Johnson & Johnson's provision for taxes on income increased from 2009 to 2010 but then declined significantly from 2010 to 2011.

Effective Income Tax Rate (EITR)

Johnson & Johnson, effective income tax rate (EITR) reconciliation

Source: Based on data from Johnson & Johnson Annual Reports

Item	Description	The company
Effective tax rate	A ratio calculated by dividing the reported amount of income tax expense attributable to continuing operations for the period by GAAP-basis pretax income from continuing operations.	Johnson & Johnson's effective tax rate declined from 2009 to 2010 but then increased from 2010 to 2011 not reaching 2009 level.

Deferred Tax Assets (Liabilities), Net

Johnson & Johnson, deferred tax assets (liabilities), net

Source: Based on data from Johnson & Johnson Annual Reports

Item	Description	The company
Deferred tax assets	The aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; net of deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value.	Johnson & Johnson's deferred tax assets declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
Deferred income taxes	For entities that net deferred tax assets and tax liabilities, represents the unclassified net amount of deferred tax assets and liabilities as of the balance sheet date, which result from applying the applicable enacted tax rate to net temporary differences and carryforwards pertaining to assets or liabilities. A temporary difference is a difference between the tax basis of an asset or liability and its carrying amount in the financial statements prepared in accordance with generally accepted accounting principles that will reverse in ensuing periods.	Johnson & Johnson's deferred income taxes declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.