Starwood 2003 Annual Report Download - page 81

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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
intercompany receivables. Gains and losses from foreign currency transactions are reported currently in costs
and expenses and were insigniÑcant for all periods presented.
Income Taxes. The Company provides for income taxes in accordance with SFAS No. 109, ""Account-
ing for Income Taxes''. The objectives of accounting for income taxes are to recognize the amount of taxes
payable or refundable for the current year and deferred tax liabilities and assets for the future tax
consequences of events that have been recognized in an entity's Ñnancial statements or tax returns.
Deferred tax assets and liabilities are measured using enacted tax rates in eÅect for the year in which
those temporary diÅerences are expected to be recovered or settled. The eÅect on deferred tax assets and
liabilities of a change in tax rates is recognized in earnings in the period when the new rate is enacted.
The Trust has elected to be treated as a REIT under the provisions of the Code. As a result, the Trust is
not subject to federal income tax on its taxable income at corporate rates provided it distributes annually all of
its taxable income to its shareholders and complies with certain other requirements.
Earnings Per Share. The following represents a reconciliation of basic earnings per Share to diluted
earnings per Share for income from continuing operations (in millions, except per Share data):
Year Ended December 31,
2003 2002 2001
Earnings Shares Per Share Earnings Shares Per Share Earnings Shares Per Share
Basic earnings from
continuing operations ÏÏÏÏ $105 203 $0.52 $251 201 $1.24 $147 201 $0.73
EÅect of dilutive securities:
Employee options and
restricted stock awards Ì 4 Ì 4 Ì 5
Diluted earnings from
continuing operations ÏÏÏÏ $105 207 $0.51 $251 205 $1.22 $147 206 $0.71
Included in the Basic Share numbers for the year ended December 31, 2003, 2002 and 2001 are
approximately 1 million, 2 million and 2 million shares, respectively, of Class A Exchangeable Preferred
Shares (""Class A EPS'') and Class B Exchangeable Preferred Shares (""Class B EPS'').
Stock-Based Compensation. The Company has three stock-based employee long term incentive plans,
which are described in Note 18. Stock Incentive Plans. The Company accounts for those plans under the
recognition and measurement principles of Accounting Principles Board (""APB'') Opinion No. 25 ""Account-
ing for Stock Issued to Employees'' and related interpretations. No stock-based employee compensation cost
is reÖected in net income as all options granted to employees under these plans have an exercise price equal to
the fair value of the underlying equity on the date of grant. The following table illustrates the eÅect on net
F-15