Starwood 2012 Annual Report Download - page 175

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS
with ASC Topic 805, Business Combinations, we accounted for this transaction as a step acquisition, remeasured
our previously held investment to fair value and recorded the approximately $50 million difference between fair
value and our 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 our consolidated balance sheet, including the
resulting goodwill of approximately $26 million. We entered into a long-term management contract for the hotel
in which we exchanged our minority ownership interest and recorded a deferred gain of approximately $30
million in connection with this exchange.
During the year ended December 31, 2010, we paid approximately $23 million to acquire a controlling
interest in a joint venture, in the Americas, in which we 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 our former partners exercised its right to put its interest to us in accordance with the terms of
the joint venture agreement. In accordance with ASC Topic 805, Business Combinations, we accounted for this
transaction as a step acquisition, remeasured our 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
our consolidated balance sheet, including goodwill of approximately $26 million. The results of operations going
forward from the acquisition date have been included in our consolidated statements of income.
Note 5. Asset Dispositions and Impairments
During the year ended December 31, 2012, we sold one wholly-owned hotel for gross cash proceeds of
approximately $16 million and recognized a pre-tax loss of $7 million in the gain (loss) on asset dispositions and
impairments, net, line item. The hotel was sold subject to a long-term franchise agreement. Also during the year
ended December 31, 2012, we sold two wholly-owned hotels, subject to long-term management agreements, for
gross cash proceeds of approximately $251 million. We recorded deferred gains of approximately $100 million
in connection with these sales. The deferred gains will be amortized into the management fees, franchise fees and
other income line over the initial terms of the management agreements, which are 20 years.
Additionally, during the year ended December 31, 2012, we recorded a loss of $9 million related to the
other-than-temporary impairment of our investment in an unconsolidated joint venture.
Finally, during the year ended December 31, 2012, we sold five wholly-owned hotels, unencumbered by
management or franchise agreements, for gross cash proceeds of approximately $275 million. In connection with
the sales, we recognized a gain of approximately $78 million (net of tax), partially offset by an impairment
charge of $5 million (net of tax) recorded in discontinued operations, net (see Note 18).
During the year ended December 31, 2011, we sold two wholly-owned hotels for cash proceeds of
approximately $237 million. These hotels were sold subject to long-term management agreements and we recorded
deferred gains of approximately $66 million relating to the sales. The deferred gains will be amortized into the
management fees, franchise fees and other income line over the initial terms of the management agreements. Also
during the year ended December 31, 2011, we sold our interest in a consolidated joint venture for cash proceeds of
approximately $44 million, with the buyer assuming $57 million of our debt (see Note 15). We 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, we recorded an impairment charge of $31 million
to write-off our noncontrolling interest in a joint venture that owns a hotel in Tokyo, Japan and a $9 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. These amounts were partially offset by a $50 million gain as a result
of remeasuring the fair value of our previously held noncontrolling interest in two hotels in which we obtained a
controlling interest (see Note 4).
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