Johnson & Johnson (JNJ)

Johnson & Johnson recognizes revenue from product sales when obligations under the terms of a contract with the customer are satisfied; generally, this occurs with the transfer of control of the goods to customers. Johnson & Johnson’s global payment terms are typically between 30 to 90 days. Provisions for certain rebates, sales incentives, trade promotions, coupons, product returns and discounts to customers are accounted for as variable consideration and recorded as a reduction in sales.

Product discounts granted are based on the terms of arrangements with direct, indirect and other market participants, as well as market conditions, including consideration of competitor pricing. Rebates are estimated based on contractual terms, historical experience, patient outcomes, trend analysis and projected market conditions in the various markets served. Johnson & Johnson evaluates market conditions for products or groups of products primarily through the analysis of wholesaler and other third-party sell-through and market research data, as well as internally generated information.

Sales returns are estimated and recorded based on historical sales and returns information. Products that exhibit unusual sales or return patterns due to dating, competition or other marketing matters are specifically investigated and analyzed as part of the accounting for sales return accruals.

Sales returns allowances represent a reserve for products that may be returned due to expiration, destruction in the field, or in specific areas, product recall. The sales returns reserve is based on historical return trends by product and by market as a percent to gross sales. In accordance with Johnson & Johnson’s accounting policies, Johnson & Johnson generally issues credit to customers for returned goods. Johnson & Johnson’s sales returns reserves are accounted for in accordance with the U.S. GAAP guidance for revenue recognition when right of return exists. Sales returns reserves are recorded at full sales value. Sales returns in the Consumer and Pharmaceutical segments are almost exclusively not resalable. Sales returns for certain franchises in the Medical Devices segment are typically resalable but are not material. Johnson & Johnson infrequently exchanges products from inventory for returned products. The sales returns reserve for the total Company has been approximately 1.0% of annual net trade sales during the fiscal reporting years 2018, 2017 and 2016.

Promotional programs, such as product listing allowances and cooperative advertising arrangements, are recorded in the same period as related sales. Continuing promotional programs include coupons and volume-based sales incentive programs. The redemption cost of consumer coupons is based on historical redemption experience by product and value. Volume-based incentive programs are based on the estimated sales volumes for the incentive period and are recorded as products are sold. These arrangements are evaluated to determine the appropriate amounts to be deferred or recorded as a reduction of revenue. Johnson & Johnson also earns profit-share payments through collaborative arrangements for certain products, which are included in sales to customers. For all years presented, profit-share payments were less than 2.0% of the total revenues and are included in sales to customers.

Source: 10-K (filing date: 2019-02-20).

Johnson & Johnson, Income Statement, Revenues

US$ in millions

	12 months ended	Dec 30, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 28, 2014
	Consumer
	Pharmaceutical
	Medical Devices
	Sales to customers

Based on: 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-24).