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ASU No. 2009-17, “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved
with Variable Interest Entities” (formerly SFAS No. 167).
ASU No. 2009-16 amended the accounting for transfers of financial assets. Under ASU No. 2009-16, the
qualifying special purpose entities (“QSPEs”) used in the Company’s securitization transactions are no longer
exempt from consolidation. ASU No. 2009-17 prescribes an ongoing assessment of the Company’s involvement in
the activities of the QSPEs and the Company’s rights or obligations to receive benefits or absorb losses of the trusts
that could be potentially significant in order to determine whether those variable interest entities (“VIEs”) will be
required to be consolidated in the Company’s financial statements. In accordance with ASU No. 2009-17, the
Company concluded it is the primary beneficiary of the QSPEs and accordingly, the Company began consolidating
the QSPEs on January 1, 2010 (see Note 10). Using the carrying amounts of the assets and liabilities of the QSPEs as
prescribed by ASU No. 2009-17 and any corresponding elimination of activity between the QSPEs and the
Company resulting from the consolidation on January 1, 2010, the Company recorded a $417 million increase in
total assets, a $444 million increase in total liabilities, a $26 million (net of tax) decrease in beginning retained
earnings and a $1 million decrease to stockholders equity. The Company has additional VIEs whereby the Company
was determined not to be the primary beneficiary (see Note 26).
Beginning January 1, 2010, the Company’s balance sheet and statement of income no longer reflect activity
related to its Retained Interests, but instead reflects activity related to its securitized vacation ownership notes
receivable and the corresponding securitized debt, including interest income, loan loss provisions, and interest
expense. Interest income and loan loss provisions associated with the securitized vacation ownership notes
receivable are included in the vacation ownership and residential sales and services line item resulting in an
increase of $52 million for the year ended December 31, 2010 as compared to the same period in 2009. Interest
expense of $27 million was recorded for the year ended December 31, 2010. The cash flows from borrowings and
repayments associated with the securitized vacation ownership debt are now presented as cash flows from financing
activities. The Company does not expect to recognize gains or losses from future securitizations as a result of the
adoption of this new guidance.
The Company’s statement of income for the year ended December 31, 2009 and its balance sheet as of
December 31, 2009 have not been retrospectively adjusted to reflect the adoption of ASU Nos. 2009-16 and
2009-17. Therefore, current period results and balances will not be comparable to prior period amounts, particularly
with regards to:
• Restricted cash
• Other assets
• Investments
• Vacation ownership and residential sales and services
• Interest expense
In April 2009, the FASB issued FASB Staff Position (“FSP”) Financial Accounting Standard (“FAS”)
No. 107-1 and Accounting Principles Board (“APB”) No. 28-1 “Interim Disclosures about Fair Value of Financial
Instruments” (“FSP FAS No. 107-1 and APB No 28-1”), included in the Codification as ASC 825-10-65-1. This
topic requires disclosures about the fair value of financial instruments for annual and interim reporting periods of
publicly traded companies and is effective in reporting periods ending after June 15, 2009. On June 30, 2009, the
Company adopted this topic, which did not have a material impact on its consolidated financial statements.
In January 2009, the FASB issued FSP Issue No. FAS No. 132(R)-1 “Employers Disclosures about Pensions
and Other Postretirement Benefit Plan Assets” (“FSP FAS No. 132(R)-1”), included in the Codification as
ASC 715-20-65-2. This topic provides guidance on an employer’s disclosures about plan assets of a defined benefit
pension or other postretirement plan. This topic is effective for fiscal years ending after December 15, 2009. The
F-14
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)