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 company's fiscal year ends on the Friday closest to
December 31 for domestic operations and on November
30 for foreign operations. Fiscal 1980 (ended January 2,
1981) includes 53 weeks. All other years presented
contain 52 weeks.
Managed and Leased Hotel Operations
The company operates 53 hotels under management
and lease agreements where 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
$76,253,000 at January 1,1982 and $72,729,000 at
January 2,1981. Foreign net income was $8,177,000 in
1981, $11,389,000 in 1980 and $12,994,000 in 1979.
In 1981 the company adopted Statement of Financial
Accounting Standards No. 52, Foreign Currency Translation (SFAS No. 52). Accordingly, cumulative translation
adjustments through January 1,1982 (other than those
related to operations in highly inflationary economies)
have been included in shareholders' equity. The effect on
net income of adopting SFAS No. 52 was not material.
Theme park costs incurred during the off-season are
deferred (included in prepaid expenses) and charged to
expense during the operating season based on
Property and Equipment
The cost of new units includes interest, rent charges
and real estate taxes incurred during development.
Capitalized interest totaled $24,168,000 inl981,
$12,546,000 in 1980 and $4,705,000 in 1979. Replacements and improvements, including most costs of converting units, are capitalized.
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, $12,936,000 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 $6,764,000 at January 1,1982 is being amortized over periods of up to 40 years.
Operating costs 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
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 pre-tax income. Company contributions to the
plan were $12,698,000 in 1981, $10,621,000 in 1980
and $10,337,000 in 1979.
Income taxes are based on reported income. Deferred
income taxes are provided for timing differences between
the recognition of certain income and expenses for financial reporting and tax purposes, principally depreciation
and interest. 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 ($36,340,000 as
of January 1,1982) because management considers these
earnings to be permanently invested.
Earnings Per Share
Primary earnings per share are based on the weighted
average number of shares outstanding during each year,
adjusted for the dilutive effect of employee stock option
and purchase plans, deferred stock compensation and
the conversion of certain convertible debt.
Fully diluted earnings per share further assumes the
conversion of all convertible debt. Primary and fully
diluted shares averaged 26,876,251 and 26,933,932,
respectively, in 1981.