Starwood 2011 Annual Report Download - page 135

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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS
Note 4. Significant Acquisitions
During the year ended December 31, 2011, the Company executed a transaction with its former partner in a
joint venture that owned three luxury hotels in Austria. In connection with the transaction, the Company acquired
substantially the entire interest in two of the hotels in exchange for its interest in the third hotel and a cash
payment, by the Company, of approximately $27 million. The Company previously held a 47.4% ownership
interest in the hotels. In accordance with ASC 805, Business Combinations, the Company accounted for this
transaction as a step acquisition, remeasured its previously held investment to fair value and recorded the
approximately $50 million difference between fair value and its carrying value to the gain (loss) on asset
dispositions and impairments, net, line item. The fair values of the assets and liabilities acquired have been
recorded in the Company’s consolidated balance sheet, including the resulting goodwill of approximately $26
million. The Company entered into a long-term management contract for the hotel in which it exchanged its
minority ownership interest and recorded a deferred gain of approximately $30 million in connection with this
exchange.
During the year ended December 31, 2010, the Company paid approximately $23 million to acquire a
controlling interest in a joint venture in which it had previously held a non-controlling interest. The primary
business of the joint venture is to develop, license and manage restaurant concepts. The acquisition took place
after one of the Company’s former partners exercised its right to put its interest to the Company in accordance
with the terms of the joint venture agreement. In accordance with ASC 805, Business Combinations, the
Company accounted for this transaction as a step acquisition, remeasured its previously held investment to fair
value and recorded the approximately $5 million difference between fair value and its carrying value to the gain
(loss) on asset dispositions and impairments, net, line item. The fair values of the assets and liabilities acquired
were recorded in Starwood’s consolidated balance sheet, including the resulting goodwill of approximately $26
million. The results of operations going forward from the acquisition date have been included in the Company’s
consolidated statements of income.
Note 5. Asset Dispositions and Impairments
During the year ended December 31, 2011, the Company sold two wholly-owned hotels for cash proceeds of
approximately $237 million. These hotels were sold subject to long-term management agreements, and the
Company recorded deferred gains of approximately $66 million relating to the sales. Also during the year ended
December 31, 2011 the Company sold its interest in a consolidated joint venture for cash proceeds of
approximately $44 million, with the buyer assuming $57 million of the Company’s debt (see Note 15). The
Company recognized a pretax loss of $18 million in discontinued operations as a result of the sale (see Note 18).
Additionally, during the year ended December 31, 2011, the Company recorded an impairment charge of
$31 million to write-off its noncontrolling interest in a joint venture that owns a hotel in Tokyo, Japan, a $16
million loss due to the impairment of fixed assets that were written down in connection with significant
renovations and related asset retirements at two properties and losses relating to the impairment of six hotels
whose carrying value exceeded their fair value. These amounts were partially offset by a $50 million gain as a
result of remeasuring the fair value of its previously held noncontrolling interest in two hotels in which it
obtained a controlling interest (see Note 4).
During the year ended December 31, 2010, the Company recorded a net loss on dispositions of
approximately $39 million, primarily related to a $53 million loss on the sale of one wholly-owned hotel subject
to a long-term management contract, a $4 million impairment of fixed assets that are being retired in connection
with a significant renovation of a wholly-owned hotel, and a $2 million impairment on one hotel whose carrying
value exceeded its fair value. These charges were partially offset by a gain of $14 million from insurance
proceeds received for a claim at a wholly-owned hotel that suffered damage from a storm in 2008, a $5 million
F-18