NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the
accounts of Marriott Corporation and all subsidiaries.
Investments in less than 50% owned affiliates in which the
company possesses significant influence are accounted
for under the equity method. All material intercompany
transactions and balances have been eliminated. The results of Cruise Ships and other minor operations were
combined into Hotels and certain other reclassifications
were made to prior year amounts to conform to the 1982
The company's fiscal year ends on the Friday closest
to December 31 for domestic operations and November
30 for foreign operations. Fiscal year 1980 includes 53
weeks. All other years presented contain 52 weeks.
Managed and Leased Hotel Operations
The company operates 72 hotels under management
and lease agreements whereby payments to owners are
based primarily on hotel profits. Sales, expenses and
operating working capital of managed and leased hotels
operated with the company's employees are included in
the accompanying consolidated financial statements.
Payments to owners are included in rent expense.
The consolidated financial statements include net
assets of foreign subsidiaries and affiliates of $74,063,000
at December 31, 1982 and $76,253,000 at January 1,
1982. Foreign net income was $3,446,000 in 1982,
$8,177,000 in 1981 and $11,389,000 in 1980.
Property and Equipment « 3
The cost of new units includes interest, rent charges
and real estate taxes incurred during development. Capitalized interest totaled $32,768,000 in 1982, $24,168,000 in
1981 and $12,546,000 in 1980. Replacements and
improvements, including most costs of converting units,
Depreciation and amortization are calculated using the
straight-line method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the
shorter of asset or lease life.
Upon sale or retirement of property and equipment
(excluding normal sales or retirements of theme park
rides and equipment), the costs less accumulated depreciation and salvage are charged or credited to income.
Theme park rides and equipment are depreciated using
the composite method, and no gain or loss is recognized
on normal sales or retirements.
Cost in Excess of Net Assets of Businesses Acquired
Of the cost in excess of net assets of businesses
acquired, $11,765,000 relates to acquisitions prior to
October 31,1970 (at which time amortization became
mandatory) and is not being amortized because, in the
opinion of management, it has continuing value. The
remaining $15,164,000 at December 31,1982 is being
amortized over periods of up to 40 years.
Pre-Opening and Off-Season Costs
Costs of an operating nature incurred prior to
opening are deferred and amortized over three years for
hotels, five years for theme parks and one year for other
major operations. Similar costs for all other operations are
expensed as incurred.
Theme park costs incurred during the off-season are
deferred (included in prepaid expenses) and charged to
expense during the operating season.
Profit Sharing Plan
The company contributes to a profit sharing plan for
the benefit of employees meeting certain eligibility requirements and electing participation in the plan. Company contributions are a specified percentage of the company's pretax income as defined by the plan and were $11,983,000
in 1982, $12,698,000 in 1981 and $10,621,000 in 1980.
■ The provision for income taxes is based on income
recognized for financial reporting and includes timing
differences between such income and that recognized for
tax purposes, principally depreciation, interest, and partnership interests. Investment tax credits are accounted for
using the "flow-through" method.
Provision for income taxes has not been made on
unremitted earnings of foreign subsidiaries ($32,958,000
as of December 31,1982) because management considers these earnings to be permanently invested.