Starwood 2012 Annual Report Download - page 200

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2012 December 31, 2011
Hierarchy
Level
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Off-Balance sheet:
Letters of credit ...................... 2 $ — $ 117 $ — $ 171
Surety bonds ......................... 2 — 80 — 21
Total off-balance sheet ............... $ — $ 197 $ — $ 192
As previously discussed, on January 1, 2012, we adopted ASU No. 2011-04. As a result, we have disclosed
on a prospective basis the financial hierarchy that prioritizes inputs to valuation techniques as described in ASC
Topic 820, Fair Value Measurements and Disclosures.
The carrying value of our restricted cash approximates its fair value. We estimate the fair value of our VOI
notes receivable and securitized VOI notes receivable using assumptions related to current securitization market
transactions. The amount is then compared to a discounted expected future cash flow model using a discount rate
commensurate with the risk of the underlying notes, primarily determined by the credit worthiness of the
borrowers based on their FICO scores. The results of these two methods are then evaluated to determine the
estimated fair value. The fair value of other notes receivable is estimated based on terms of the instrument and
current market conditions. These financial instrument assets are recorded in the other assets line item in our
consolidated balance sheet.
We estimate the fair value of our publicly traded debt based on the bid prices in the public debt markets.
The carrying amount of our floating rate debt is a reasonable basis of fair value due to the variable nature of the
interest rates. Our non-public, securitized debt, and fixed rate debt fair value is determined based upon
discounted cash flows for the debt rates deemed reasonable for the type of debt, prevailing market conditions and
the length to maturity for the debt.
The fair values of our letters of credit and surety bonds are estimated to be the same as the contract values
based on the nature of the fee arrangements with the issuing financial institutions.
Note 25. Commitments and Contingencies
We had the following contractual obligations outstanding as of December 31, 2012 (in millions):
Total
Due in Less
Than 1 Year
Due in
1-3 Years
Due in
3-5 Years
Due After
5 Years
Unconditional purchase obligations (a) ............. $143 $76 $62 $5 $—
Other long-term obligations ..................... 16 1 3 4 8
Total contractual obligations .................... $159 $77 $65 $9 $ 8
(a) Included in these balances are commitments that may be reimbursed or satisfied by our managed and
franchised properties.
We had the following commercial commitments outstanding as of December 31, 2012 (in millions):
Amount of Commitment Expiration Per Period
Total
Less Than
1 Year 1-3 Years 3-5 Years
After
5 Years
Standby letters of credit ........................... $117 $94 $19 $— $4
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