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 Notes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 >  7 INVENTORY Inventory, totaling $1,981 million and $1,557 million as of January 2, 2009, and December 28, 2007, respectively, consists primarily of Timeshare segment interval, fractional ownership, and residential products totaling $1,959 million and $1,536 million as of January 2, 2009, and December 28, 2007, respectively. Inventory totaling $22 million and $21 million as of January 2, 2009, and December 28, 2007, respectively, primarily relates to hotel operating supplies for the limited number of properties we own or lease. We value Timeshare segment interval, fractional ownership, and residential products at the lower of cost or net realizable value and generally value operating supplies at the lower of cost (using the first-in, first-out method) or market. Consistent with recognized industry practice, we classify Timeshare segment interval, fractional ownership, and residential products inventory, which has an operating cycle that exceeds 12 months, as a current asset. We recorded a pretax charge of $22 million in 2008 within the "Timeshare-direct" caption of our Consolidated Statements of Income related to the impairment of a fractional and whole ownership real estate project held for development by a joint venture that we consolidate. We recorded a pretax benefit of $12 million in 2008 within the "Minority interest" caption of our Consolidated Statements of Income representing our joint venture partner's pretax share of the $22 million impairment charge. Accordingly, the impact to our Timeshare segment was $10 million. We made the adjustment in accordance with FAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," to adjust the carrying value of the real estate to our estimate of its fair value at year-end 2008. The downturn in market conditions including contract cancellations and tightening in the credit markets, especially for jumbo mortgage loans, were the predominant items considered in our analysis. We estimated the fair value of the inventory utilizing a probability weighted cash flow model containing our expectations of future performance discounted at a 10-year risk-free interest rate determined from the yield curve for U.S. Treasury instruments (3.68 percent). We also recorded a pretax charge of $9 million in 2008 in the "Timeshare-direct" caption of our Consolidated Statement of Income for write-downs of inventory due to the termination of certain phases of timeshare development in Europe (see the "Other Charges" caption of Footnote No. 20 "Restructuring Costs and Other Charges," for additional information). > Back to top of page |
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