Starwood 2006 Annual Report Download - page 92

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For the year ended December 31, 2006, the loss on disposition represents a $2 million tax assessment
associated with the disposition of the Company’s former gaming business in 1999.
For the year ended December 31, 2005, the loss from operations represents a $2 million sales and use tax
assessment related to periods prior to the Company’s disposal of its gaming business in 1999, offset by a $1 million
income tax benefit related to this business.
For the year ended December 31, 2004, the net gain on disposition primarily consists of the reversal of
$10 million of reserves set up in conjunction with the sale of the Company’s former gaming business in 1999. The
related contingencies were resolved in January 2005 and, therefore, the reserves are no longer required. The gain on
disposition also includes a tax benefit of $16 million associated with the disposition of the Company’s former
gaming business as a result of the favorable resolution of certain tax matters.
Note 17. Employee Benefit Plans
Adoption of SFAS No. 158. On December 31, 2006, the Company adopted the recognition and disclosure
provisions of SFAS No. 158. SFAS No. 158 required the Company to recognize the funded status (i.e., the difference
between the fair value of plan assets and the projected benefit obligations) of its pension plans in the December 31,
2006 consolidated balance sheet, with a corresponding adjustment to accumulated other comprehensive income, net
of tax. The adjustment to accumulated other comprehensive income at adoption represents the net unrecognized
actuarial losses, which were previously netted against the plan’s funded status in the Company’s consolidated
balance sheet pursuant to the provisions of SFAS No. 87. These amounts will be subsequently recognized as net
periodic pension cost pursuant to the Company’s historical accounting policy for amortizing such amounts. Further,
actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic pension cost in the
same periods will be recognized as a component of other comprehensive income. Those amounts will be
subsequently recognized as a component of net periodic pension cost on the same basis as the amounts recognized
in accumulated other comprehensive income at adoption of SFAS No. 158.
The incremental effects of adopting the provisions of SFAS No. 158 on the Company’s consolidated balance
sheet at December 31, 2006 are presented in the following table (in millions). The adoption of SFAS No. 158 had no
effect on the Company’s consolidated statement of income for the year ended December 31, 2006, or for any prior
period presented, and it will not effect the Company’s operating results in future periods. Had the Company not been
required to adopt SFAS No. 158 at December 31, 2006, it would have recognized an additional minimum liability
pursuant to the provisions of SFAS No. 87. The effect of recognizing the additional minimum liability is included in
table below in the column labeled “Prior to Application of SFAS No. 158.”
Prior to
Adopting
SFAS
No. 158
Effect of
Adopting
SFAS
No. 158
As
Reported
Prior to
Adopting
SFAS
No. 158
Effect of
Adopting
SFAS
No. 158
As
Reported
Prior to
Adopting
SFAS
No. 158
Effect of
Adopting
SFAS
No. 158
As
Reported
Pension Benefits Foreign Pension Benefits Postretirement Benefits
Other assets ............ $— $— $— $— $ 1 $ 1 $— $— $—
Accrued expenses ....... $— $ 1 $ 1 $— $— $— $— $— $—
Deferred income taxes .... $— $— $— $— $ 2 $ 2 $— $ 1 $ 1
Other liabilities ......... $18 $(2) $16 $24 $12 $36 $17 $(5) $12
Accumulated other
comprehensive income . . $ (4) $ 1 $ (3) $(38) $(12) $(50) $— $ 5 $ 5
Included in accumulated other comprehensive income at December 31, 2006 is unrecognized actuarial losses
of $48 million ($36 million, net of tax) that have not yet been recognized in net periodic pension cost. The actuarial
loss included in accumulated other comprehensive income and expected to be recognized in net periodic pension
cost during the year ended December 31, 2007 is $2 million ($2 million, net of tax).
F-31
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)