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Microsoft Excel LibreOffice Calc


Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

Marriott may hold an equity interest in ventures established to develop or acquire and own hotel properties. These ventures are generally limited liability companies or limited partnerships. Marriott accounts for investments in such entities using the cost method of accounting when Marriott holds an interest so minor that Marriott has virtually no influence over the operating and financial policies of the investee and the equity method of accounting when Marriott holds an interest more than so minor that it allows Marriott to have influence, but not control, over the operating and financial policies of the investee. Marriott accounts for investments in other ventures using the equity method of accounting when Marriott exercises significant influence over the entities. If Marriott does not exercise significant influence, Marriott accounts for the investment using the cost method of accounting. Marriott consolidates entities that Marriott controls.

Under the accounting guidance for the consolidation of variable interest entities, Marriott analyzes the variable interests, including equity investments, loans, and guarantees, to determine if an entity in which Marriott has a variable interest is a variable interest entity. Marriott’s analysis includes both quantitative and qualitative reviews. Marriott bases the quantitative analysis on the forecasted cash flows of the entity, and the qualitative analysis on the review of the design of the entity, its organizational structure including decision-making ability, and relevant financial agreements. Marriott also uses the qualitative analysis to determine if Marriott must consolidate a variable interest entity as its primary beneficiary.

Marriott evaluates an investment for impairment when circumstances indicate that Marriott may not be able to recover the carrying value. For example, when evaluating the ventures, Marriott considers loan defaults, significant underperformance relative to historical or projected operating performance, or significant negative industry or economic trends.

Marriott impairs investments Marriott accounts for using the equity and cost methods of accounting when Marriott determines that there has been an "other-than-temporary" decline in the venture’s estimated fair value compared to its carrying value. Additionally, a venture’s commitment to a plan to sell some or all of its assets could cause Marriott to evaluate the recoverability of the venture’s individual long-lived assets and possibly the venture itself.

Marriott calculates the estimated fair value of an investment using either a market approach or an income approach. Marriott utilizes the same assumptions and methodology for the income approach that Marriott describes in the "Goodwill" caption. For the market approach, Marriott uses internal analyses based primarily on market comparables and assumptions about market capitalization rates, growth rates, and inflation.

When Marriott acquires an investment that qualifies for the equity method of accounting, Marriott determines the acquisition date fair value of the identifiable assets and liabilities. If the carrying amount exceeds the proportional share in the equity of the investee, Marriott amortizes the difference on a straight-line basis over the underlying assets’ estimated useful lives when calculating equity method earnings attributable to Marriott, excluding the difference attributable to land, which Marriott does not amortize.

For investments in securities classified as available-for-sale, Marriott determines the cost basis of the securities sold using specific identification, meaning that Marriott tracks the securities individually.

Source: 10-K (filing date: 2018-02-15).


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Marriott International Inc., adjustment to Net Income

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net income (as reported) hidden hidden hidden hidden hidden
Add: Unrealized gain (loss) on available-for-sale securities, net of tax hidden hidden hidden hidden hidden
Net income (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).


Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Marriott International Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Marriott International Inc.’s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Marriott International Inc.’s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Marriott International Inc.’s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Marriott International Inc., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

2017 Calculations

1 Net profit margin = 100 × Net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Marriott International Inc.’s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Shareholders’ equity (deficit) hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Shareholders’ equity (deficit) hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

2017 Calculations

1 ROE = 100 × Net income ÷ Shareholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income ÷ Shareholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Marriott International Inc.’s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

2017 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Marriott International Inc.’s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.