NOTES TO F
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 using 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 91 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 $78.8 million at December
28,1984 and $76.2 million at December 30,1983; sales
of $198.1 million in 1984, $181.8 million in 1983 and
$148.1 million in 1982; and income before income taxes
of $23.7 million in 1984, $21.3 million in 1983 and $10.8
million in 1982.
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 $72.1
million in 1984, $38.1 million in 1983 and $32.8 million
in 1982. 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, the costs less
accumulated depreciation and salvage are charged or
credited to income.
Assets Held for Sale
When management commits to a formal plan to
dispose of property and equipment, the net book value of
the assets is reclassified to Assets Held for Sale, any
anticipated disposition losses are accrued and depreciation is discontinued.
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 $11.8 million is not being amortized because, in management's judgment, it has continuing value. The remaining $14.9 million at December 28,
1984 is being amortized over periods of up to 40 years.
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.
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 $22.3 million in 1984, $18 million in 1983 and $12
million in 1982.
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 ($37.7 million
as of December 28,1984) because management considers these earnings to be permanendy 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 of
employee stock option and purchase plans and deferred
stock compensation. Primary and fully diluted shares for
1984 were 26,961,269 and 26,989,636, respectively.
Discretionary Cash Flow
Discretionary Cash Flow represents funds provided
from operations less capital expenditures that, in management's opinion, were required to maintain the competitive
position of existing property and equipment