Review the instructions for the SEC 10-K project. This week's report focuses on the Income Statement. Review the discussion board in week two on the Income Statement. Write a brief report of at least...

16
JOHNSON AND JOHNSON INCOME STATEMENT ANALYSIS
    Description
    2018($ in Million)
    2019($ in Million)
    2020 ($ in Million)
    Sales to custome
    $81,581
    $82,059
    $82,584
    Cost of product sold
    $27,091
    $27,556
    $28,427
    Gross Profit
    $54,490
    $54,503
    $54,157
    Selling, marketing and administrative expense
    $22,540
    $22,178
    $22,084
    Research and development expense
    $10,775
    $11,355
    $12,159
    In-process research and development
    $1,126
    $890
    $181
    Interest income
    $(611)
    $(357)
    $(111)
    Interest expense, net of portion capitalized
    $1,005
    $318
    $201
    Other (income) expense, net
    $1,405
    $2,525
    $2,899
    Restructuring
    $251
    $266
    $247
    Earnings before provision for taxes on income
    $17,999
    $17,328
    $17,497
    Provision for taxes on income
    $2,702
    $2,209
    $1,783
    Net Income(Loss)
    $15,297
    $15,119
    $14,714
Revenue -
    Notes to Consolidated Financial statement
Company implemented ASC808 (Collaborative A
angements) of FASB in FY 2020 which clarifies that certain collaborative a
angement transaction between participant should be accounted as revenue when the counterparty is customer. It didn’t have any material impact on Consolidated FS.
    
    Net Income
    TABLE 6
    
    2018($ in million)
    2019($ in million)
    2020($ in million)
    
    Total Revenue ($)
    $81,581
    $82,059
    $82,584
· The Company recognizes revenue from product sales when obligations under the terms of a contract with the customer are satisfied, which happens with the transfer of control/title of the goods to customers.
· Company’s Global payment terms are 30-90 days.
· Provisions for certain rebates, sales incentives, trade promotions, coupons, product returns and discounts to customers are recorded as a reduction in sales. Liability recognised in Consolidated BS.
· Discounts, rebates, incentives are estimated based on contract a
angement with market participant, conditions, historical experience, patient outcome, trends and competitor pricing.
· Sales returns are estimated and recorded based on historical sales and returns information.
· Such allowances
eserve is based on historical return trends by product and by market as a percent to gross sales.
· Company’s sales returns reserves are accounted for in accordance with the U.S. GAAP guidance for revenue recognition when right of return exists.
· Returns recorded at full sales value.
· Sales returns reserve for the total Company has been approximately 1.0% of annual net trade sales during each of the fiscal years 2020, 2019 and 2018.
· Company also earns profit-share payments through collaborative a
angements for certain products, which are included in sales to customers. Profit-share payments were less than 3.0% of the total revenues and are included in sales to customers.
· The amount of revenue received for shipping and handling is less than 0.5% of sales to customers for all periods presented.
Cost of Products Sold –
    These represent the direct cost incu
ed to convert the raw material and work in progress inventory into finished goods for sale. In simple words the ca
ying value of goods sold. It is called Cost of Sale/Cost of production.
· Cost of products sold increased as a percent to sales driven by:
· Medical Device idle capacity costs associated with COVID-19 related production slowdowns ;
· Establishment of obsolescence reserves and fixed cost deleveraging associated with the impact of COVID-19 in the Medical Devices business;
· Supply chain costs associated with the development of the COVID-19 vaccine in the Pharmaceutical business.
· Partially offset by:
· Favorable mix within the Pharmaceutical business
· Favorable product mix with a higher percentage of sales coming from the Pharmaceutical business.
· Cost of Product sold is around 35% of the Total Annual revenue in 2020, 33.5% in 2019 and 33.2% in 2018. Hence it has been improving.
Table 1
    
    2018($ in million)
    2019($ in million)
    2020($ in million)
    Gross Profit ($)
    54490
    54503
    54,157
    Gross Profit (%)
    66.8%
    66.5%
    65.0%
· Royalties/milestones paid to collaborative partner (post regulatory approval) are capitalized as intangible assets and amortized to cost of products.
Gross...