NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING
Principles of Consolidation
The financial statements include the accounts of
Marriott Corporation, its subsidiaries and other majority-
owned affiliates, except Marriott Financial Services, Inc.,
a wholly-owned finance subsidiary. The investment in the
finance subsidiary, and investments in less than 50%-
owned affiliates over which the company has the ability
to exercise 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.
Managed and Leased Hotel Operations
The company operates 79 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 financial statements. Payments to owners
are included in rent expense.
The financial statements include net assets of foreign subsidiaries and affiliates of $76,200,000 at December 30,1983 and $74,063,000 at December 31,1982.
Net income of these operations was $12,102,000 in 1983,
$3,446,000 in 1982 and $8,177,000 in 1981.
Property and Equipment
Costs incurred in developing real estate, including
interest, rent and real estate taxes during the construction period, are capitalized. Capitalized interest totaled
$38,100,000 in 1983, $32,768,000 in 1982 and
$24,168,000 in 1981. Replacements and improvements,
including most costs of converting units, are capitalized.
Depreciation and amortization are computed using
the straight-line method over the estimated useful lives of
the assets. Leasehold improvements are amortized over
the shorter of the asset life or lease term.
Upon sale or retirement of property and equipment
(excluding 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
The cost in excess of net assets of businesses acquired
prior to October 31,1970 (at which time amortization
became mandatory) of $11,765,000 is not being amortized because, in management's judgment, it has continuing value. The remaining $14,615,000 at December
30,1983 is being amortized over periods of up to 40
Pre-Opening and Off-Season Costs
Costs of an operating nature incurred prior to opening
are deferred and amortized over three years for hotels 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
pre-tax income as defined by the plan and were $18,025,000
in 1983, $11,983,000 in 1982 and $12,698,000 in 1981.
The provision for income taxes is based on income
recognized for financial reporting purposes and includes
the effect of 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.
No provision for income taxes has been made on the
unremitted earnings of foreign subsidiaries ($37,286,000
as of December 30,1983) because management considers
these earnings to be permanently invested.
Earnings Per Share
Primary and fully diluted earnings per share are
based on the weighted average number of shares outstanding during each year, adjusted for the dilutive effect