Starwood 2010 Annual Report Download - page 141

Note 13. Deferred Gains
The Company defers gains realized in connection with the sale of a property for which the Company continues
to manage the property through a long-term management agreement and recognizes the gains over the initial term of
the related agreement. As of December 31, 2010 and 2009, the Company had total deferred gains of $1.011 billion
and $1.093 billion, respectively, included in accrued expenses and other liabilities in the Company’s consolidated
balance sheets. Amortization of deferred gains is included in management fees, franchise fees and other income in
the Company’s consolidated statements of income and totaled approximately $81 million, $82 million and
$83 million in 2010, 2009 and 2008, respectively.
Note 14. Restructuring, Goodwill Impairment and Other Special Charges (Credits), Net
Restructuring, Goodwill Impairment and Other Special Charges (Credits) by operating segment are as follows
(in millions):
2010 2009 2008
Year Ended December 31,
Segment
Hotel ...................................................... $(74) $ 21 $ 41
Vacation Ownership & Residential ................................ (1) 358 100
Total ...................................................... $(75) $379 $141
During the year ended December 31, 2010, the Company received cash proceeds of $75 million in connection
with the favorable settlement of a lawsuit. The Company recorded this settlement, net of the reimbursement of legal
costs of approximately $10 million incurred in connection with the litigation, as a credit to restructuring, goodwill
impairment, and other special charges (credits) line item.
During the year ended December 31, 2010, the Company recorded a credit of $8 million to the restructuring,
goodwill impairment, and other special (credits) charges line item as a liability associated with an acquisition in
1998 that was no longer deemed necessary (see Note 26).
During the year ended December 31, 2009, the Company completed a comprehensive review of its vacation
ownership business. The Company decided not to develop certain vacation ownership sites and future phases of
certain existing projects. As a result of these decisions, the Company recorded a primarily non-cash impairment
charge of $255 million. The impairment included a charge of approximately $148 million primarily related to land
held for development; a charge of $64 million for the reduction in inventory values at four properties; the write-off
of fixed assets of $21 million; facility exit costs of $15 million and $7 million in other costs. Additionally, as a result
of this decision and the current economic climate, the Company recorded a $90 million non-cash charge for the
impairment of goodwill in the vacation ownership reporting unit (see Note 8).
Additionally, in 2009, the Company recorded restructuring and other special charges of $34 million, primarily
related to severance charges and costs to close vacation ownership sales galleries, associated with its ongoing
initiative of rationalizing its cost structure.
During the year ended December 31, 2008, the Company recorded restructuring and other special charges of
$141 million, including $62 million of severance and related charges associated with the start of its initiative of
rationalizing the Company’s cost structure. The Company also recorded impairment charges of approximately
$79 million primarily related to the decision not to develop two vacation ownership projects as a result of the current
economic climate and its impact on business conditions.
In determining the fair value associated with the impairment charges the Company primarily used the income
and market approaches. Under the income approach, fair value was determined based on estimated future cash
flows taking into consideration items such as operating margins and the sales pace of vacation ownership intervals,
F-25
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)