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Other Charges
Charges for Guarantees and Reserves for Loan Losses
We sometimes issue guarantees to lenders and other third parties in connection with some financing transactions and other obligations. We also advance loans to some owners of properties that we manage. As a result of the downturn in the economy, certain hotels have experienced significant declines in profitability and the owners may not be able to meet debt service obligations to us or, in some cases, to third-party lending institutions. In addition, we expect profit levels at a few hotels to drop below guaranteed levels. As a result, based on cash flow projections, we expect to fund under some of our guarantees, which we do not deem recoverable, and we expect that one of the loans made by us will not be repaid according to its original terms. Due to the expected fundings under guarantees that we deemed nonrecoverable, we recorded charges of $16 million in the fourth quarter of 2008 in the "General, administrative, and other expenses" caption in our Consolidated State ments of Income. Due to the expected loan loss, we recorded a charge of $22 million in the fourth quarter of 2008 in the "Provision for loan losses" caption in our Consolidated Statements of Income.

Timeshare Inventory Write-downs
As a result of terminating certain phases of timeshare development in Europe, we recorded an inventory write-down of $9 million in the fourth quarter of 2008. We recorded this charge in the "Timeshare-direct" caption of our Consolidated Statements of Income.

Accounts Receivable-Bad Debts
In the fourth quarter of 2008, we reserved $4 million of accounts receivable, which we deemed uncollectible, generally as a result of the unfavorable hotel operating environment, following an analysis of those accounts. We recorded this charge in the "General, administrative, and other expenses" caption in our Consolidated Statements of Income.

Timeshare Contract Cancellation Allowances
Our financial statements reflect net contract cancellation allowances totaling $12 million recorded in the fourth quarter of 2008 in anticipation that a portion of contract revenue and cost previously recorded for certain projects under the percentage-of-completion method will not be realized due to contract cancellations prior to closing. We have an equity method investment in one of these projects, and reflected $7 million of the $12 million in the "Equity in earnings" caption in our Consolidated Statements of Income. The remaining net $5 million of contract cancellation allowances consisted of a reduction in revenue, net of adjustments to product costs and other direct costs, and was recorded in Timeshare sales and services revenue, net of direct costs.

Timeshare Residual Interests Valuation
The fair market value of our residual interest in timeshare notes sold declined in the fourth quarter of 2008 primarily due to an increase in the market rate of interest at which we discount future cash flows to estimate the fair market value of the retained interests. The increase in the market rate of interest reflects deteriorating economic conditions and disruption in the credit markets, which significantly increased the borrowing costs to issuers. As a result of this change, we recorded a $32 million charge in the "Timeshare sales and services" caption in our Consolidated Statements of Income to reflect the decrease in the fair value of these residual interests.

Timeshare Hedge Ineffectiveness
Given the significant deterioration in the credit markets, we expect that any potential note sale transactions pursued by the Company in the near term will be materially different from arrangements originally contemplated, and accordingly the sensitivity of a hedge the Company previously entered into to manage interest rate risk associated with forecasted note sales no longer significantly corresponds to the sensitivity in expected note sale proceeds. Differences include expected legal structures, modifications to priority of cash flow, and higher costs. The change in terms (inputs) used to determine hedge effectiveness for Timeshare's note sale hedges resulted in the recognition of $12 million in hedge ineffectiveness. We recorded this hedge ineffectiveness as a reduction in note sale gains in the "Timeshare sales and services" caption in our Consolidated Statements of Income.

Asset Impairments and Other Charges
One project that is in development and in which the Company has a joint venture investment was unable to draw on existing financing commitments as a result of the recent turmoil in the capital markets and the bankruptcy of the project's major lender. As a result, based on our analysis of expected future cash flows, we determined that our investment in that joint venture was fully impaired, and we recorded an impairment charge of $9 million in the "Equity in earnings" caption in our Consolidated Statements of Income.

In addition, as a result of the economic downturn and the inability of certain developers to obtain financing, we also recorded write-offs of other assets ($12 million) related to development costs associated with projects we no longer deem probable in the "General, administrative, and other expenses" caption of our Consolidated Statements of Income.

We also deemed certain cost method tax investments to be other-than-temporarily impaired because we do not expect to receive any future economic benefit from these investments. Accordingly, we recorded an impairment charge of $9 million for those investments in the "Gains and other income" caption of our Consolidated Statements of Income.

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