STARWOOD HOTEL & RESORTS WORLDWIDE, INC | 2013 | FY | 3


Note 7.    Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the years ended December 31, 2013 and 2012 was as follows (in millions):

 

     Americas
Segment
    EAME
Segment
    Asia
Pacific
Segment
    Vacation
Ownership
and
Residential
Segment
     Total  

Balance at January 1, 2012

   $ 786      $ 256      $ 283      $ 151       $ 1,476   

Acquisitions

            6                       6   

Currency translation adjustment

            3                       3   

Asset dispositions

     (58                           (58

Other

                                    
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at December 31, 2012

   $ 728      $ 265      $ 283      $ 151       $ 1,427   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at January 1, 2013

   $ 728      $ 265      $ 283      $ 151       $ 1,427   

Acquisitions

                                    

Currency translation adjustment

     (1     5        (1             3   

Asset dispositions

     (22                           (22

Other

            (1                    (1
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance at December 31, 2013

   $ 705      $ 269      $ 282      $ 151       $ 1,407   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

At October 31, 2013, the date of our annual impairment valuation, we evaluated the goodwill of the hotel reporting units and determined that, for each of the hotel reporting units, the fair value significantly exceeded the book value. We used a market approach to determine the fair value of the reporting units. We utilized earnings multiples from various independent, third party investment firms and applied those earnings multiples to the respective earnings streams (owned hotels, management and franchise fees and other) generated by each of our hotel reporting units to determine the fair value for each of the hotel segments.

At October 31, 2013, we determined qualitatively that, for the vacation ownership and residential reporting unit, it was not more likely than not that goodwill was impaired, and thus, the two-step goodwill impairment test was not required. In making this determination, we considered the significant excess of fair value over book value calculated in step one of the 2012 impairment test, trends in the discount rate, favorable trends in our current year operations, favorable 2013 industry performance versus prior year, analyst multiples and other positive qualitative information, all of which indicated that it is more likely than not that the fair value of the reporting unit is greater than its book value. Based on this evaluation of internal and external qualitative factors, we concluded that the two-step goodwill impairment test was not required for the vacation ownership reporting unit.

In 2012, we evaluated the goodwill of the vacation ownership and residential reporting unit and determined that its fair value significantly exceeded its book value. As well, we evaluated the goodwill for the hotel reporting units using the same earnings multiples approach described previously and determined that, for each of the hotel reporting units, the fair value significantly exceeded the book value. In 2012, we concluded no impairment existed for any of our reporting units.

Intangible assets consisted of the following (in millions):

 

     December 31,  
     2013     2012  

Trademarks and trade names

   $ 316      $ 314   

Management and franchise agreements

     493        456   

Other

     16        15   
  

 

 

   

 

 

 
     825        785   

Accumulated amortization

     (200     (187
  

 

 

   

 

 

 
   $ 625      $ 598   
  

 

 

   

 

 

 

The intangible assets related to management and franchise agreements have finite lives, and accordingly, we recorded amortization expense of $28 million, $24 million, and $29 million, respectively, during the years ended December 31, 2013, 2012 and 2011. The other intangible assets noted above have indefinite lives.

Amortization expense relating to intangible assets with finite lives for each of the years ended December 31, is expected to be as follows (in millions):

 

2014

   $ 28   

2015

     27   

2016

     25   

2017

     24   

2018

     23   

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