| Summary of Significant Accounting Policies | 12 Months Ended |
| Jan. 03, 2014 |
| Accounting Policies [Abstract] | ' |
| Summary of Significant Accounting Policies | ' |
| 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| Our Business |
| Marriott Vacations Worldwide Corporation (“Marriott Vacations Worldwide,” “we” or “us,” which includes our consolidated subsidiaries except where the context of the reference is to a single corporate entity) is the exclusive worldwide developer, marketer, seller and manager of vacation ownership and related products under the Marriott Vacation Club and Grand Residences by Marriott brands. We are also the exclusive worldwide developer, marketer and seller of vacation ownership and related products under The Ritz-Carlton Destination Club brand, and we have the non-exclusive right to develop, market and sell whole ownership residential products under The Ritz-Carlton Residences brand. The Ritz-Carlton Hotel Company, L.L.C. (“Ritz-Carlton Hotel Company”), a subsidiary of Marriott International, Inc. (“Marriott International”), generally provides on-site management for Ritz-Carlton branded properties. |
| Our business is grouped into three reportable segments: North America, Europe and Asia Pacific. As of January 3, 2014, we operated 62 properties in the United States and nine other countries and territories. |
| We generate most of our revenues from four primary sources: selling vacation ownership products; managing our resorts; financing consumer purchases; and renting vacation ownership inventory. |
| Our Spin-Off from Marriott International, Inc. |
| On November 21, 2011, the spin-off of Marriott Vacations Worldwide from Marriott International (the “Spin-Off”) was completed pursuant to a Separation and Distribution Agreement (the “Separation and Distribution Agreement”) between Marriott Vacations Worldwide and Marriott International. Marriott Vacations Worldwide became an independent public company as a result of the distribution pursuant to the Spin-Off of 100 percent of the outstanding shares of Marriott Vacations Worldwide common stock to the shareholders of Marriott International. |
| Prior to the Spin-Off, Marriott International completed an internal reorganization to contribute its non-U.S. and U.S. subsidiaries that conducted its vacation ownership business to Marriott Vacations Worldwide, a newly formed wholly owned subsidiary of Marriott International; the contributed subsidiaries included Marriott Ownership Resorts, Inc., which does business under the name Marriott Vacation Club International. The distribution of Marriott Vacations Worldwide common stock was made on November 21, 2011, with Marriott International shareholders receiving one share of Marriott Vacations Worldwide common stock for every ten shares of Marriott International common stock held as of the close of business Eastern time on the record date of November 10, 2011. Fractional shares of Marriott Vacations Worldwide common stock were not distributed; any fractional share of Marriott Vacations Worldwide common stock otherwise issuable to a Marriott International shareholder was sold in the open market on such shareholder’s behalf, with such shareholders receiving a cash payment in lieu of such fractional share. |
| In connection with the Spin-Off, we entered into the Separation and Distribution Agreement and several other agreements which govern the ongoing relationship between Marriott Vacations Worldwide and Marriott International. |
| Principles of Consolidation and Basis of Presentation |
| The consolidated financial statements presented herein and discussed below include 100 percent of the assets, liabilities, revenues, expenses and cash flows of Marriott Vacations Worldwide, all entities in which Marriott Vacations Worldwide has a controlling voting interest (“subsidiaries”), and those variable interest entities for which Marriott Vacations Worldwide is the primary beneficiary in accordance with consolidation accounting guidance. Through the date of the Spin-Off, these financial statements present the historical consolidated results of operations, financial position and cash flows of the Marriott Vacations Worldwide business that now comprises our operations. Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation. |
| Through the date of the Spin-Off, the consolidated financial statements presented herein, and discussed below, were prepared on a stand-alone basis and were derived from the consolidated financial statements and accounting records of Marriott International. These consolidated financial statements were prepared as if the reorganization described under “Our Spin-Off from Marriott International, Inc.” above had occurred as of the first day of the earliest period presented. The consolidated financial statements reflect our financial position, results of operations and cash flows as prepared in conformity with United States Generally Accepted Accounting Principles (“GAAP”). All significant intracompany transactions and accounts within these Consolidated Financial Statements have been eliminated. |
| Prior to the Spin-Off, Marriott Vacations Worldwide was a subsidiary of Marriott International. The financial information included herein may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an independent, publicly traded company during all of the periods presented. |
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| Our fiscal year ends on the Friday nearest to December 31. The fiscal years in the following table included 52 weeks, except for 2013, which included 53 weeks. Unless otherwise specified, each reference to a particular year in these financial statements means the fiscal year ended on the date shown in the following table, rather than the corresponding calendar year: |
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| Fiscal Year | | Fiscal Year-End Date | | | | | | | | | |
| 2013 | | | January 3, 2014 | | | | | | | | | |
| 2012 | | | December 28, 2012 | | | | | | | | | |
| 2011 | | | December 30, 2011 | | | | | | | | | |
| We refer throughout to (i) our Consolidated Financial Statements as our “Financial Statements,” (ii) our Consolidated Statements of Operations as our “Statements of Operations,” (iii) our Consolidated Balance Sheets as our “Balance Sheets” and (iv) our Consolidated Statements of Cash Flows as our “Cash Flows.” In addition, references throughout to numbered “Footnotes” refer to the numbered Notes in these Notes to Condensed Consolidated Financial Statements, unless otherwise noted. |
| All significant transactions between us and Marriott International have been included in these Financial Statements. The total net effect of the settlement of these intercompany transactions prior to the Spin-Off is reflected in the Cash Flows as a financing activity. In connection with the Spin-Off, we completed certain transactions with Marriott International related to our separation from Marriott International, which resulted in a net reduction to our equity of approximately $600 million. These transactions primarily consisted of the reversal of our deferred tax assets, which were retained by Marriott International following the Spin-Off, and establishment of deferred tax liabilities. |
| Through the date of the Spin-Off, our Financial Statements include costs for services provided by Marriott International including, but not limited to, information technology support, systems maintenance, telecommunications, accounts payable, payroll and benefits, human resources, self-insurance and other shared services. Historically, these costs were charged to us based on specific identification or on a basis determined by Marriott International to reflect a reasonable allocation to us of the actual costs incurred to perform these services. Marriott International allocated indirect general and administrative costs to us for certain functions provided by Marriott International. The services provided to us included, but were not limited to, executive office, legal, tax, finance, government and public relations, internal audit, treasury, investor relations, human resources and other administrative support, which were allocated to us primarily on the basis of our proportion of Marriott International’s overall revenue. We consider the basis on which the expenses have been allocated to be a reasonable reflection of the utilization of services provided to or the benefit received by us during the periods presented. The allocations may not, however, reflect the expense we would have incurred as an independent, publicly traded company for the periods presented. Actual costs that might have been incurred had we been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions we might have performed ourselves or outsourced and strategic decisions we might have made in areas such as information technology and infrastructure. Following the Spin-Off, we perform these functions using our own resources or purchased services from either Marriott International or third parties. For an interim period some of these functions continued to be provided by Marriott International under Transition Services Agreements (“TSAs”). As of the end of 2013, we have ceased using most of these services. In addition to the TSAs, we entered into a number of commercial agreements with Marriott International in connection with the Spin-Off, many of which have terms longer than one year. These agreements may not have existed prior to the Spin-Off, or may be on different terms than the terms of agreements between us and Marriott International that existed prior to Spin-Off. |
| Prior to the Spin-Off, the majority of our domestic cash was transferred to Marriott International daily and Marriott International funded our operating and investing activities as needed. Accordingly, the cash and cash equivalents held by Marriott International at the corporate level were not allocated to us for any of the periods prior to the Spin-Off presented. Prior to the Spin-Off, cash and cash equivalents in our Balance Sheets primarily represented cash held locally by international entities included in our Financial Statements. We included debt incurred from our limited direct financing and historical vacation ownership notes receivable securitizations on our Balance Sheets, as this debt is specific to our business. Marriott International did not allocate a portion of its external senior debt interest cost to us since none of the external senior debt recorded by Marriott International was directly related to our business. We also did not include any interest expense for cash advances from Marriott International since historically Marriott International did not allocate any interest expense related to intercompany advances to any of the historical Marriott International divisions. |
| Prior to the Spin-Off, Marriott International allocated a portion of expenses associated with its self-insurance programs to us as part of the historical costs for services Marriott International provided. In connection with the Spin-Off, Marriott International did not allocate any portion of the related reserves as these reserves represent obligations of Marriott International which are not transferable. |
| The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Such estimates include, but are not limited to, revenue recognition, cost of vacation ownership products, inventory valuation, property and equipment valuation, loan loss reserves, Marriott Rewards customer loyalty program liabilities, self-insured medical plan reserves, equity-based compensation, income taxes, loss contingencies and exit and disposal activities reserves. Actual amounts may differ from these estimated amounts. |
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| We have reclassified certain prior year amounts to conform to our 2013 presentation, including establishing the consumer financing interest expense line on the Statements of Operations. Consumer financing interest expense represents interest expense associated with the debt from our $250 million non-recourse warehouse credit facility (the “Warehouse Credit Facility”) and from the securitization of our vacation ownership notes receivable in the asset-backed securities (“ABS”) market. We distinguish consumer financing interest expense from all other interest expense because the debt associated with the consumer financing interest expense is secured by vacation ownership notes receivable that have been sold to bankruptcy remote special purpose entities and is generally non-recourse to us. See Footnote No. 15, “Variable Interest Entities” for further discussion of these facilities. |
| Restatement of Prior Financial Statements |
| In 2013, during the course of an internal review of certain sales documentation processes related to the sale of certain vacation ownership interests in properties associated with our Europe segment, we determined that the documentation we provided for certain sales of vacation ownership products was not strictly compliant. As a result, in accordance with applicable European regulation, the period of time during which purchasers of such interests may rescind their purchases was extended. We record revenues from the sale of vacation ownership products once the rescission period has ended. Originally, we recorded revenues from these sales of vacation ownership products based on the rescission periods in effect assuming compliant documentation had been provided to the purchasers rather than the extended periods. As a result, we recognized revenue in incorrect periods between fiscal years 2010 and 2013 and misstated revenues in our previously filed consolidated financial statements. |
| The documentation issue described above was limited to sales documentation provided to purchasers of certain interests in properties associated with our Europe segment. We took corrective measures and, as a result, compliant documentation is being provided to purchasers. In addition, we provided compliant documentation to purchasers for whom the extended rescission period had not yet expired. The cumulative impact of these items through December 28, 2012 was a reduction in reported income before income taxes of $12 million. However, as compliant documentation was subsequently provided as part of our corrective measures, the extended rescission period for most of the purchases at issue ended during the second quarter of 2013. As of January 3, 2014, sales having a net pre-tax impact of $1 million had been rescinded. As a result, approximately $11 million of the cumulative impact of these items is reflected as an increase in income before income taxes for the year ended January 3, 2014. |
| The consolidated restated financial statements include certain other corrections related to the timing of recording adjustments to previously reported deferred tax balances. Certain deferred tax assets were determined to not be realizable in future years and thus were eliminated, albeit in the incorrect fiscal year for the years ended December 28, 2012, December 30, 2011 and December 31, 2010. The need for these corrections was identified while we were developing internal processes relating to deferred taxes after we became a stand-alone public company. In addition to the adjustments required as a result of the errors described above, the restated consolidated financial statements include certain previously unrecorded immaterial adjustments to our financial statements for fiscal years 2010 and 2011 relating to cost reimbursements, which previously were recorded on a net basis. |
| The adjustments necessary to correct all of these errors have no impact on previously reported cash flows from operations and do not have a material impact on our balance sheet as of any date. In accordance with applicable accounting guidance, an adjustment to the financial statements for each individual period presented is required to reflect the correction of the period-specific effects of the errors described above, if material. Based on our evaluation of relevant quantitative and qualitative factors, we determined the identified misstatements are not material to our individual prior period consolidated financial statements; however, the cumulative correction of the prior period errors would be material to our current year consolidated financial statements. Consequently, we have restated the Statements of Operations for the years ended December 28, 2012 and December 30, 2011. We have restated the accompanying Balance Sheet as of December 28, 2012. We have also restated the opening January 1, 2011 balances presented in our Consolidated Statements of Shareholders’ Equity from amounts previously reported, to correct the prior period misstatements of approximately $9 million that have been presented as a reduction to retained earnings. |
| The cumulative impact of these misstatements on our Cash Flows for the years ended December 28, 2012 and December 30, 2011 is inconsequential as the impact on individual line items within operating activities is not material and has no impact on net cash provided by (used in) operating, investing or financing activities. However, we have restated these Cash Flows to reflect changes to individual line items within operating activities. |
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| The impact of these adjustments on the financial statements is detailed in the tables below. |
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| | As of December 28, 2012 | |
| ($ in millions) | | As | | | Adjustment | | | As | |
| Previously | Restated |
| Reported | |
| CONSOLIDATED BALANCE SHEETS | | | | | | | | | | | | |
| Inventory | | $ | 881 | | | $ | 7 | | | $ | 888 | |
| Other | | $ | 135 | | | $ | 2 | | | $ | 137 | |
| TOTAL ASSETS | | $ | 2,604 | | | $ | 9 | | | $ | 2,613 | |
| Advance deposits | | $ | 42 | | | $ | 22 | | | $ | 64 | |
| Deferred taxes | | $ | 43 | | | $ | -1 | | | $ | 42 | |
| TOTAL LIABILITIES | | $ | 1,453 | | | $ | 21 | | | $ | 1,474 | |
| Retained earnings (deficit) | | $ | 14 | | | $ | -12 | | | $ | 2 | |
| TOTAL EQUITY | | $ | 1,151 | | | $ | (12) | | | $ | 1,139 | |
| TOTAL LIABILITIES AND EQUITY | | $ | 2,604 | | | $ | 9 | | | $ | 2,613 | |
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| | For the Year Ended | |
| December 28, 2012 |
| ($ in millions, except per share data) | | As | | | Adjustment | | | As | |
| Previously | Restated |
| Reported (1) | |
| CONSOLIDATED STATEMENTS OF OPERATIONS | | | | | | | | | | | | |
| Sale of vacation ownership products | | $ | 627 | | | $ | -9 | | | $ | 618 | |
| TOTAL REVENUES | | $ | 1,648 | | | $ | -9 | | | $ | 1,639 | |
| Cost of vacation ownership products | | $ | 205 | | | $ | -2 | | | $ | 203 | |
| Marketing and sales | | $ | 330 | | | $ | -1 | | | $ | 329 | |
| TOTAL EXPENSES | | $ | 1,606 | | | $ | -3 | | | $ | 1,603 | |
| INCOME BEFORE INCOME TAXES | | $ | 37 | | | $ | -6 | | | $ | 31 | |
| Provision for income taxes | | $ | -21 | | | $ | -3 | | | $ | -24 | |
| NET INCOME | | $ | 16 | | | $ | -9 | | | $ | 7 | |
| Basic earnings (loss) per share | | $ | 0.46 | | | $ | (0.27) | | | $ | 0.19 | |
| Diluted earnings (loss) per share | | $ | 0.44 | | | $ | -0.26 | | | $ | 0.18 | |
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| (1) | As previously reported amounts include interest expense amounts that have been reclassified as consumer financing interest expense to conform to our 2013 presentation. | | | | | | | | | | | |
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| | For the Year Ended | |
| December 30, 2011 |
| ($ in millions, except per share data) | | As | | | Adjustment | | | As | |
| Previously | Restated |
| Reported | |
| CONSOLIDATED STATEMENTS OF OPERATIONS | | | | | | | | | | | | |
| Sale of vacation ownership products | | $ | 634 | | | $ | -7 | | | $ | 627 | |
| Cost reimbursements | | $ | 331 | | | $ | 18 | | | $ | 349 | |
| TOTAL REVENUES | | $ | 1,613 | | | $ | 11 | | | $ | 1,624 | |
| Cost of vacation ownership products | | $ | 242 | | | $ | -3 | | | $ | 239 | |
| Marketing and sales | | $ | 342 | | | $ | -1 | | | $ | 341 | |
| Cost reimbursements | | $ | 331 | | | $ | 18 | | | $ | 349 | |
| TOTAL EXPENSES | | $ | 1,833 | | | $ | 14 | | | $ | 1,847 | |
| LOSS BEFORE INCOME TAXES | | $ | -214 | | | $ | -3 | | | $ | -217 | |
| Benefit for income taxes | | $ | 36 | | | $ | 9 | | | $ | 45 | |
| NET LOSS | | $ | -178 | | | $ | 6 | | | $ | -172 | |
| Basic (loss) earnings per share | | $ | -5.29 | | | $ | 0.17 | | | $ | (5.12) | |
| Diluted (loss) earnings per share | | $ | -5.29 | | | $ | 0.17 | | | $ | -5.12 | |
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| Revenue Recognition |
| Sale of Vacation Ownership Products |
| We market and sell real estate and in substance real estate in our three reportable segments. Real estate and in substance real estate include deeded vacation ownership products, deeded beneficial interests, rights to use real estate, and other interests in trusts that solely hold real estate and deeded whole ownership units in residential buildings. Within the North America segment, we also market and sell residential units at certain properties on a limited basis. |
| Vacation ownership products may be sold for cash or we may provide financing. We are not providing financing on sales of whole ownership products. Except for revenue from the sale of residential stand-alone structures, which we recognize upon transfer of title to a third party, we recognize revenue when all of the following exist or are true: the customer has executed a binding sales contract, the statutory rescission period has expired (after which time the purchasers are not entitled to a refund except for non-delivery by us), we have deemed the receivable collectible and the remainder of our obligations are substantially completed. In addition, before we recognize any revenues, the purchaser must have met the initial investment criteria and, as applicable, the continuing investment criteria. A purchaser has met the initial investment criteria when we receive a minimum down payment. In accordance with the guidance for accounting for real estate time-sharing transactions, we must also take into consideration the fair value of certain incentives provided to the purchaser when assessing the adequacy of the purchaser’s initial investment. In those cases where we provide financing to the purchaser, the purchaser must be obligated to remit monthly payments under financing contracts that represent the purchaser’s continuing investment. |
| Resort Management and Other Services Revenues |
| Resort management and other services revenues consist primarily of ancillary revenues and management fees. Ancillary revenues consist of goods and services that are sold or provided by us at restaurants, golf courses and other retail and service outlets located at developed resorts. We recognize ancillary revenue when goods have been provided and/or services have been rendered. |
| We provide day-to-day-management services, including housekeeping services, operation of a reservation system, maintenance and certain accounting and administrative services for property owners’ associations. We receive compensation for such management services which is generally based on either a percentage of total costs to operate such resorts or a fixed fee arrangement. We recognize revenues when earned in accordance with the terms of the contract and record them as a component of Resort management and other services revenues on our Statements of Operations. Management fee revenues were $70 million, $67 million and $63 million during 2013, 2012 and 2011, respectively. |
| Resort management and other services revenues include additional fees for services we provide to our property owners’ associations, as well as certain annual and transaction based fees we charge to owners and other third parties for services. We recognize fee revenues when services have been rendered. Fee revenues included in Resort management and other services revenues were $27 million in 2013, $24 million in 2012 and $17 million in 2011, as reflected on our Statements of Operations. |
| Financing Revenues |
| We offer consumer financing as an option to qualifying customers purchasing vacation ownership products, which is typically collateralized by the underlying vacation ownership products. We recognize interest income on an accrual basis. The contractual terms of the financing agreements require that the contractual level of annual principal payments be sufficient to amortize the loan over a customary period for the vacation ownership product being financed, which is generally ten years. Generally, payments commence under the financing contracts 30 to 60 days after closing. We record an estimate of uncollectible amounts at the time of the sale with a charge to the provision for loan losses, which we classify as a reduction of Sale of vacation ownership products on our Statements of Operations. Revisions to estimates of uncollectible amounts also impact the provision for loan losses and can increase or decrease revenue. We earn interest income from the financing arrangements on the principal balance outstanding over the life of the arrangement and record that interest income in Financing revenues on our Statements of Operations. |
| Financing revenues include certain annual and transaction based fees we charge to owners and other third parties for services. We recognize fee revenues when services have been rendered. Fee revenues included in Financing revenues were $6 million in 2013, $6 million in 2012 and $7 million in 2011, as reflected on our Statements of Operations. |
| Rental Revenues |
| We record rental revenues when occupancy has occurred or, in the case of unused prepaid rentals, upon forfeiture. |
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| Cost Reimbursements |
| Cost reimbursements include direct and indirect costs that property owners’ associations and joint ventures reimburse to us. In accordance with the accounting guidance for gross versus net presentation, we record these revenues on a gross basis. These costs primarily consist of payroll and payroll-related costs for management of the property owners’ associations and other services we provide where we are the employer. We recognize cost reimbursements when we incur the related reimbursable costs. Cost reimbursements consist of actual expenses with no added margin. |
| Multiple-Element Transactions |
| From time to time, we enter into transactions involving multiple elements. We analyze contracts with multiple elements under the accounting guidance for revenue recognition in multiple-element arrangements. If we enter into transactions for the sale of multiple products or services, we evaluate whether the delivered elements have value to the customer on a stand-alone basis, and whether there is objective and reliable evidence of fair value for each undelivered element in the transaction. If these criteria are met, then we account for each deliverable in the transaction separately. We generally recognize revenue for undelivered elements on a straight-line basis over the contractual performance period for time-based elements or upon delivery to the customer. If we are unable to determine the fair value of one or more undelivered elements in the transaction, we recognize the revenue on a straight-line basis over the period in which the last deliverable is provided to the customer. |
| Multiple-element transactions require judgment to determine the selling price or fair value of the different elements. The judgments impact the amount of revenue and expenses recognized over the term of the contract, as well as the period in which they are recognized. |
| Inventory |
| Our inventory consists primarily of completed vacation ownership products, vacation ownership products under construction and land held for future vacation ownership product development. We carry our inventory at the lower of (1) cost, including costs of improvements and amenities incurred subsequent to acquisition, capitalized interest and real estate taxes plus other costs incurred during construction, or (2) estimated fair value, less costs to sell, which can result in impairment charges and/or recoveries of previous impairments. |
| We account for vacation ownership inventory and cost of vacation ownership products in accordance with the guidance for accounting for real estate time-sharing transactions, which define a specific application of the relative sales value method for reducing vacation ownership inventory and recording cost of sales as described in our policy for revenue recognition for vacation ownership products. Also, pursuant to the guidance for accounting for real estate time-sharing transactions, we do not reduce inventory for cost of vacation ownership products related to anticipated credit losses (accordingly, no adjustment is made when inventory is reacquired upon default of the related receivable). These standards provide for changes in estimates within the relative sales value calculations to be accounted for as real estate inventory true-ups, which we refer to as product cost true-ups, and are recorded in Cost of vacation ownership product expenses on the Statements of Operations to retrospectively adjust the margin previously recorded subject to those estimates. For 2013, 2012 and 2011, product cost true-ups relating to vacation ownership products increased carrying values of inventory by $18 million, $30 million and $2 million, respectively. |
| For residential real estate projects, we allocate costs to individual residences in the projects based on the relative estimated sales value of each residence in accordance with ASC 970, “Real Estate—General,” which defines the accounting for costs of real estate projects. Under this method, we reduce the allocated cost of a unit from inventory and recognize that cost as cost of sales when we recognize the related sale. Changes in estimates within the relative sales value calculations for residential products (similar to condominiums) are accounted for as prospective adjustments to cost of vacation ownership products. |
| Capitalization of Costs |
| We capitalize interest and certain salaries and related costs incurred in connection with the following: (1) development and construction of sales centers; (2) internally developed software; and (3) development and construction projects for our real estate inventory. We capitalize costs clearly associated with the acquisition, development and construction of a real estate project when it is probable that we will acquire a property. We capitalize salary and related costs only to the extent they directly relate to the project. We capitalize interest expense, taxes and insurance costs when activities that are necessary to get the property ready for its intended use are underway. We cease capitalization of costs during prolonged gaps in development when substantially all activities are suspended or when projects are considered substantially complete. Capitalized salaries and related costs totaled $7 million, $8 million and $11 million for 2013, 2012 and 2011, respectively. |
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| Defined Contribution Plan |
| Subsequent to the Spin-Off, we established a defined contribution plan that we administer and maintain for the benefit of all employees meeting certain eligibility requirements who elect to participate in the plan. Contributions are determined based on a specified percentage of salary deferrals by participating employees. Our employees participated in Marriott International’s comparable plan prior to the Spin-Off. We recognized compensation expense (net of cost reimbursements from property owners’ associations) for our participating employees totaling $6 million in 2013, $5 million in 2012 and $6 million in 2011. Of the $6 million compensation expense we recognized in 2011, $5 million was recognized prior to the Spin-Off and was associated with the Marriott International defined contribution plan and $1 million was recognized subsequent to the Spin-Off and was associated with our newly established defined contribution plan. |
| Deferred Compensation Plan |
| Prior to the Spin-Off, certain of our senior management had the opportunity to participate in the Marriott International, Inc. Executive Deferred Compensation Plan (the “Marriott International EDC”), which Marriott International maintains and administers. Under the Marriott International EDC, participating employees may defer payment and income taxation of a portion of their salary and bonus. It also gives participants the opportunity for long-term capital appreciation by crediting their accounts with notional earnings (at a fixed annual rate of return of 5.4 percent for both 2013 and 2012). Additional discretionary contributions to the participant’s accounts under the Marriott International EDC may be made based on subjective factors such as individual performance, key contributions and retention needs. No additional discretionary contributions were made for our employees in 2013 and 2012, and discretionary contributions of less than $1 million were made in 2011. Subsequent to the Spin-Off, we remain liable to reimburse Marriott International for distributions for participants that were employees of Marriott Vacations Worldwide at the time of the Spin-Off including earnings thereon. |
| Property and Equipment |
| Property and equipment includes our sales centers, golf courses, information technology and other assets used in the normal course of business, as well as undeveloped and partially developed land parcels that are not part of our approved development plan. We record property and equipment at cost, including interest and real estate taxes incurred during active development. We capitalize the cost of improvements that extend the useful life of property and equipment when incurred. These capitalized costs may include structural costs, equipment, fixtures, floor and decorative items and signage. We expense all repair and maintenance costs as incurred. We compute depreciation using the straight-line method over the estimated useful lives of the assets (three to forty years), and we amortize leasehold improvements over the shorter of the asset life or lease term. |
| Marriott Rewards Customer Loyalty Program |
| We participate in the Marriott Rewards customer loyalty program and we offer Marriott Rewards Points, or “points,” which we purchase from Marriott International, as incentives to purchase vacation ownership products and/or through exchange and other activities. Marriott International maintains and administers this program. The associated expense is classified on the Statements of Operations based on the source of the expense and related revenue stream. For Marriott Rewards Points issued prior to 2012, we pay Marriott International for Marriott Rewards Points when the points are redeemed by program members. Our liability for Marriott Rewards Points issued prior to 2012 represents the net present value of future cash outlays that we are obligated to pay Marriott International based on actual point redemptions. We base the carrying value of this liability on a statistical model that projects the dollar value and timing of future point redemptions. The most significant estimates involve the future cost of redeemed points, the breakage for points that will never be redeemed, and the pace at which points are redeemed. We base our estimates for these items on our historical experience, current trends and other considerations. Actual results could differ from our projections so the actual discounted future cash outlays associated with our Marriott Rewards customer loyalty program liability could differ from the amounts currently recorded. |
| Our liability for Marriott Rewards Points issued prior to 2012 represents the amount that we are obligated to pay to Marriott International based on future redemptions. These future redemptions consist of actual redemptions incurred through 2015, with a final lump sum payment in 2016. The lump sum payment represents an estimate of the present value of anticipated future redemptions of any remaining Marriott Rewards Points issued in connection with our business prior to 2012. Our liability for these Marriott Rewards Points is included in Liability for Marriott Rewards customer loyalty program on the Balance Sheets. See Footnote No. 12, “Other Liabilities” for more information. |
| For periods subsequent to 2011, we generally pay Marriott International for Marriott Rewards Points within 30 days of issuance. For Marriott Rewards Points issued for exchanges as an alternative usage option for owners who elect to exchange their inventory in the calendar fourth quarter, payment is due within 120 days of year-end. The rates we pay for the Marriott Rewards Points are based upon historical redemption costs with no future adjustment for actual costs incurred by Marriott International upon fulfillment. Our liability for these Marriott Rewards Points is included in Accrued liabilities on the Balance Sheets. |
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| Guarantees |
| We record a liability for the fair value of a guarantee on the date we issue or modify the guarantee. The offsetting entry depends on the circumstances in which the guarantee was issued. Funding under the guarantee reduces the recorded liability. On a quarterly basis, we evaluate all material estimated liabilities based on the operating results and the terms of the guarantee. If we conclude that it is probable that we will be required to fund a greater amount than previously estimated, we will record a loss. |
| Cash and Cash Equivalents |
| We consider all highly liquid investments with an initial purchase maturity of three months or less at the date of purchase to be cash equivalents. |
| Restricted Cash |
| Restricted cash primarily consists of cash held in a reserve account related to vacation ownership notes receivable securitizations, cash collected for maintenance fees to be remitted to property owners’ associations, and deposits received, primarily associated with vacation ownership products and residential sales that are held in escrow until the associated contract has closed or the period in which it can be rescinded has passed, depending on legal requirements. |
| Accounts and Contracts Receivable |
| Accounts and contracts receivable are presented net of allowances of $1 million and $2 million at the end of 2013 and 2012, respectively. |
| Loan Loss Reserves |
| Vacation Ownership Notes Receivable |
| We record an estimate of expected uncollectibility on all notes receivable from vacation ownership purchasers as a reduction of revenues from the sale of vacation ownership products at the time we recognize profit on a vacation ownership product sale. We fully reserve for all defaulted vacation ownership notes receivable in addition to recording a reserve on the estimated uncollectible portion of the remaining vacation ownership notes receivable. For those vacation ownership notes receivable that are not in default, we assess collectibility based on pools of vacation ownership notes receivable because we hold large numbers of homogeneous vacation ownership notes receivable. We use the same criteria to estimate uncollectibility for non-securitized vacation ownership notes receivable and securitized vacation ownership notes receivable because they perform similarly. We estimate uncollectibility for each pool based on historical activity for similar vacation ownership notes receivable. |
| Although we consider loans to owners to be past due if we do not receive payment within 30 days of the due date, we suspend accrual of interest only on those loans that are over 90 days past due. We consider loans over 150 days past due to be in default. We apply payments we receive for vacation ownership notes receivable on non-accrual status first to interest, then to principal and any remainder to fees. We resume accruing interest when vacation ownership notes receivable are less than 90 days past due. We do not accept payments for vacation ownership notes receivable during the foreclosure process unless the amount is sufficient to pay all past due principal, interest, fees and penalties owed and fully reinstate the note. We write off uncollectible vacation ownership notes receivable against the reserve once we receive title of the vacation ownership products through the foreclosure or deed-in-lieu process or, in Europe or Asia Pacific, when revocation is complete. For both non-securitized and securitized vacation ownership notes receivable, we estimated average remaining default rates of 7.13 percent and 7.42 percent as of January 3, 2014 and December 28, 2012, respectively. A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in our allowance for loan losses of $5 million and $6 million as of January 3, 2014 and December 28, 2012, respectively. |
| For additional information on our vacation ownership notes receivable, including information on the related reserves, see Footnote No. 3, “Vacation Ownership Notes Receivable.” |
| Costs Incurred to Sell Vacation Ownership Products |
| We charge the majority of marketing and sales costs we incur to sell vacation ownership products to expense when incurred. Deferred marketing and selling expenses, which are direct marketing and selling costs related either to an unclosed contract or a contract for which 100 percent of revenue has not yet been recognized, were $4 million at year-end 2013 and $6 million at year-end 2012 and are included on the accompanying Balance Sheets in the Other caption within Assets. |
| Valuation of Property and Equipment |
| Property and equipment includes our sales centers, golf courses, information technology and other assets used in the normal course of business, as well as undeveloped and partially developed land parcels that are not part of an approved development plan and do not meet the criteria to be classified as held for sale. We test long-lived asset groups for recoverability when changes in circumstances indicate the carrying value may not be recoverable, for example, when there are material adverse changes in projected revenues or expenses, significant underperformance relative to historical or projected operating results, or significant negative industry or economic trends. We evaluate recoverability of an asset group by comparing its carrying value to the future net undiscounted cash flows that we expect will be generated by the asset group. If the comparison indicates that the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess of carrying value over the estimated fair value. When we recognize an impairment loss for assets to be held and used, we depreciate the adjusted carrying amount of those assets over their remaining useful life. We also perform a test for recoverability when management has committed to a plan to sell or otherwise dispose of an asset group and we expect the plan will be completed within a year. |
| For information on impairment losses that we recorded associated with long-lived assets, see Footnote No. 16, “Impairment Charges.” |
| Investments |
| We consolidate entities that we control. We account for investments in joint ventures which are not consolidated variable interest entities using the equity method of accounting when we exercise significant influence over the venture. If we do not exercise significant influence, we account for the investment using the cost method of accounting. We account for investments in limited partnerships and limited liability companies using the equity method of accounting when we own more than a minimal investment. Our ownership interest in these equity method investments generally varies from 34 percent to 50 percent. |
| Valuation of Investments in Ventures |
| We evaluate an investment in a venture for impairment when circumstances indicate that the carrying value may not be recoverable due to loan defaults, significant under-performance relative to historical or projected performance, significant negative industry or economic trends, or otherwise. |
| We impair investments we have accounted for using the equity and cost methods of accounting when we determine that the venture has had an “other than temporary” decline in its estimated fair value as compared to its carrying value. Additionally, a change in business plans or strategies of a venture could cause us to evaluate the recoverability for the individual long-lived assets in the venture and possibly the venture itself. |
| We calculate the estimated fair value of an investment in a venture using the income approach. We use internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments; and estimated discount rates. We base these assumptions on our historical data and experience, third-party appraisals, industry projections, micro and macro general economic condition projections, and our expectations. |
| Fair Value Measurements |
| We have few financial instruments that we must measure at fair value on a recurring basis. See Footnote No. 4, “Financial Instruments,” for further information. We also apply the provisions of fair value measurement to various non-recurring measurements for our financial and non-financial assets and liabilities. |
| The applicable accounting standards define fair value as the price that would be received upon selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). We measure fair value of our assets and liabilities using inputs from the following three levels of the fair value hierarchy: |
| Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date. |
| Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). |
| Level 3 includes unobservable inputs that reflect our assumptions about what factors market participants would use in pricing the asset or liability. We develop these inputs based on the best information available, including our own data. |
| Derivative Instruments |
| From time to time, we may use derivative instruments to reduce market risk due to changes in interest rates and currency exchange rates, including interest rate derivatives that we may be required to enter into as a condition of the Warehouse Credit Facility. As of January 3, 2014, we were not party to any material derivative instruments or hedges. |
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| The designation of a derivative instrument as a hedge and its ability to meet the hedge accounting criteria determines how the change in fair value of the derivative instrument is recorded on our Financial Statements. A derivative qualifies for hedge accounting if, at inception, we expect the derivative to be highly effective in offsetting the underlying hedged cash flows or fair value and we fulfill the hedge documentation standards at the time we enter into the derivative contract. We designate a hedge as a cash flow hedge, fair value hedge, or a net investment in non-U.S. operations hedge based on the exposure we are hedging. The asset or liability value of the derivative will change in tandem with its fair value. For the effective portion of qualifying hedges, we record changes in fair value in other comprehensive income (“OCI”). We release the derivative’s gain or loss from OCI to match the timing of the underlying hedged items’ effect on earnings. As a matter of policy, we only enter into hedging transactions that we believe will be highly effective at offsetting the underlying risk and do not use derivatives for trading or speculative purposes. |
| Non-U.S. Operations |
| The U.S. dollar is the functional currency of our consolidated entities operating in the United States. The functional currency for our consolidated entities operating outside of the United States is generally the currency of the economic environment in which the entity primarily generates and expends cash. For consolidated entities whose functional currency is not the U.S. dollar, we translate their financial statements into U.S. dollars. We translate assets and liabilities at the exchange rate in effect as of the financial statement date and translate Statement of Operations accounts using the weighted average exchange rate for the period. We include translation adjustments from currency exchange and the effect of exchange rate changes on intercompany transactions of a long-term investment nature as a separate component of equity. We report gains and losses from currency exchange rate changes related to intercompany receivables and payables that are not of a long-term investment nature, as well as gains and losses from non-U.S. currency transactions, currently in operating costs and expenses. |
| Legal Contingencies |
| We are subject to various legal proceedings and claims in the normal course of business, the outcomes of which are subject to significant uncertainty. We record an accrual for legal contingencies when we determine that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In making such determinations we evaluate, among other things, the degree of probability of an unfavorable outcome and, when it is probable that a liability has been incurred, our ability to make a reasonable estimate of the loss. We review these accruals each reporting period and make revisions based on changes in facts and circumstances. |
| Share-Based Compensation Costs |
| In conjunction with the Spin-Off, we established the Marriott Vacations Worldwide Corporation Stock and Cash Incentive Plan (“Marriott Vacations Worldwide Stock Plan”) in order to compensate our employees and directors by issuing equity awards such as stock options, stock appreciation rights (“SARs”) and restricted stock units (“RSUs”) to them. Prior to the Spin-Off, certain of our employees received equity awards under the Marriott International, Inc. Stock and Cash Incentive Plan (“Marriott International Stock Plan”). For the fiscal years ended 2013 and 2012 and for the period from November 21, 2011 through December 30, 2011, our Statement of Operations includes expenses related to our employees’ participation in both the Marriott Vacations Worldwide Stock Plan and the Marriott International Stock Plan. For the period from January 1, 2011 through November 20, 2011, our Statements of Operations include expenses related to our employees’ participation in the Marriott International Stock Plan. |
| We follow the provisions of ASC 718, “Compensation—Stock Compensation” (“ASC 718”), which requires that a company measure the expense of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Generally, share-based awards granted to our employees vest ratably over a four-year period, and we recognize the expense associated with these awards on our Statements of Operations on a straight-line basis over the period during which an employee is required to provide service in exchange for the award. We measure the amount of compensation expense for share-based awards based on the fair value of the awards as of the date that the share-based awards are granted and adjust that expense to the estimated number of awards that we expect will vest. We generally determine the fair value of stock options and SARs using the Black-Scholes option valuation model which incorporates assumptions about expected volatility, risk free interest rate, dividend yield and expected term. The fair value of RSUs represents the number of awards granted multiplied by the average of the high and low market price of our common stock on the date the awards are granted. For awards granted after 2005, we recognize compensation cost for share-based awards ratably over the vesting period. We will issue shares from authorized shares upon the exercise of stock options or SARs held by our employees and directors. See Footnote No. 14, “Share-Based Compensation,” for more information. |
| Advertising Costs |
| We expensed advertising costs as incurred of $2 million, $2 million and $3 million in 2013, 2012 and 2011, respectively. These costs are included in the Marketing and sales expense caption on our Statements of Operations. |
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| Income Taxes |
| Although for periods prior to the Spin-Off we did not file separate tax returns from Marriott International, we have calculated the income tax provision included in these Financial Statements based on a separate return methodology, as if the entities were separate taxpayers in the respective jurisdictions. As a result, our deferred tax balances and effective tax rate as a stand-alone entity will likely differ significantly from those recognized historically. Prior to the Spin-Off, our results of operations were included in the consolidated tax filings of other Marriott International entities within the respective entity’s tax jurisdiction. Commencing with periods subsequent to November 21, 2011, we file our own consolidated U.S. federal and state income tax returns and any required filings for non-U.S. jurisdictions based on the applicable tax year in each jurisdiction. |
| We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. |
| Changes in existing tax laws and rates, their related interpretations, and the uncertainty generated by the current economic environment may affect the amounts of deferred tax liabilities or the valuations of deferred tax assets over time. Our accounting for deferred tax consequences represents management’s best estimate of future events that can be appropriately reflected in the accounting estimates. |
| We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. In the event we determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which impacts the provision for income taxes. |
| For tax positions we have taken, or expect to take, in a tax return we apply a more likely than not threshold, under which we must conclude a tax position is more likely than not to be sustained, assuming that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information, in order to continue to recognize the benefit. In determining our provision for income taxes, we use judgment, reflecting our estimates and assumptions, in applying the more likely than not threshold. |
| Prior to the Spin-Off, we did not maintain taxes payable to or from Marriott International and the tax balances outstanding at Spin-Off will be settled in accordance with the Tax Sharing and Indemnification Agreement that we entered into on November 17, 2011 with Marriott International. These deemed settlements are reflected as changes in Shareholder’s Equity. |
| For information about income taxes and deferred tax assets and liabilities, see Footnote No. 2, “Income Taxes.” |
| Earnings (Loss) Per Common Share |
| Basic earnings (loss) per common share is calculated by dividing the earnings available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per common share is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period. The dilutive effect of outstanding equity-based compensation awards is reflected in diluted earnings (loss) per common share by application of the treasury stock methods. For 2011, basic weighted average shares outstanding were computed using the number of shares of common stock outstanding immediately following the Spin-Off, as if such shares were outstanding for the entire period prior to the Spin-Off, plus the weighted average of such shares outstanding following the Spin-Off date through year-end 2011. |
| New Accounting Standards |
| Accounting Standards Update No. 2013-02 – “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU No. 2013-02”) |
| ASU No. 2013-02, which we adopted in the first quarter of 2013, amends existing guidance by requiring that additional information be disclosed about items reclassified (“reclassification adjustments”) out of accumulated other comprehensive income. The additional information includes a separate statement of the total change for each component of other comprehensive income (for example, unrealized gains or losses on available-for-sale securities or foreign currency items) and separate disclosure of both current-period other comprehensive income and reclassification adjustments. Entities are also required to present, either on the face of the income statement or in the notes to the financial statements, significant amounts reclassified out of accumulated other comprehensive income as separate line items of net income but only if the entire amount reclassified must be reclassified to net income in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity must cross-reference to other disclosures that provide additional detail about those amounts. The adoption of this update did not have a material impact on our Financial Statements. |
