Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Management’s Report on Internal Control Over Financial Reporting	74
Report of Independent Registered Public Accounting Firm	75
Report of Independent Registered Public Accounting Firm	76
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2015 and 2014	77
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013	78
Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013	79
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013	80
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2015, 2014 and 2013	81
Notes to Consolidated Financial Statements	82

Management's Report on Internal Control Over Financial Reporting

Management of Hilton Worldwide Holdings Inc. (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on this assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2015.

Ernst & Young LLP, the independent registered public accounting firm that has audited the consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2015. The report is included herein.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

Hilton Worldwide Holdings Inc.

We have audited Hilton Worldwide Holdings Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Hilton Worldwide Holdings Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Hilton Worldwide Holdings Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Hilton Worldwide Holdings Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2015 of Hilton Worldwide Holdings Inc. and our report dated February 26, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia

February 26, 2016

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

Hilton Worldwide Holdings Inc.

We have audited the accompanying consolidated balance sheets of Hilton Worldwide Holdings Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hilton Worldwide Holdings Inc. at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hilton Worldwide Holdings Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2016 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia

February 26, 2016

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	December 31,
2015				2014
ASSETS
Current Assets:
Cash and cash equivalents	$	609			$	566
Restricted cash and cash equivalents	247				202
Accounts receivable, net of allowance for doubtful accounts of $30 and $29	876				844
Inventories	442				404
Current portion of financing receivables, net	74				66
Current portion of securitized financing receivables, net	55				62
Prepaid expenses	147				133
Income taxes receivable	97				132
Other	38				90
Total current assets (variable interest entities - $141 and $136)	2,585				2,499
Property, Intangibles and Other Assets:
Property and equipment, net	9,119				7,483
Property and equipment, net held for sale	—				1,543
Financing receivables, net	592				416
Securitized financing receivables, net	295				406
Investments in affiliates	138				170
Goodwill	5,887				6,154
Brands	4,919				4,963
Management and franchise contracts, net	1,149				1,306
Other intangible assets, net	586				674
Deferred income tax assets	78				155
Other	368				356
Total property, intangibles and other assets (variable interest entities - $481 and $613)	23,131				23,626
TOTAL ASSETS	$	25,716			$	26,125
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	2,206			$	2,099
Current maturities of long-term debt	111				10
Current maturities of non-recourse debt	117				127
Income taxes payable	33				21
Total current liabilities (variable interest entities - $157 and $162)	2,467				2,257
Long-term debt	9,710				10,803
Non-recourse debt	609				752
Deferred revenues	283				495
Deferred income tax liabilities	4,630				5,216
Liability for guest loyalty program	784				720
Other	1,282				1,168
Total liabilities (variable interest entities - $627 and $788)	19,765				21,411
Commitments and contingencies - see Note 24
Equity:
Preferred stock, $0.01 par value; 3,000,000,000 authorized shares, none issued or outstanding as of December 31, 2015 and 2014	—				—
Common stock, $0.01 par value; 30,000,000,000 authorized shares, 987,487,127 issued and 987,458,360 outstanding as of December 31, 2015 and 984,623,863 issued and outstanding as of December 31, 2014	10				10
Additional paid-in capital	10,151				10,028
Accumulated deficit	(3,392		)		(4,658		)
Accumulated other comprehensive loss	(784		)		(628		)
Total Hilton stockholders' equity	5,985				4,752
Noncontrolling interests	(34		)		(38		)
Total equity	5,951				4,714
TOTAL LIABILITIES AND EQUITY	$	25,716			$	26,125

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

	Year Ended December 31,
	2015				2014				2013
Revenues
Owned and leased hotels	$	4,233			$	4,239			$	4,046
Management and franchise fees and other	1,601				1,401				1,175
Timeshare	1,308				1,171				1,109
	7,142				6,811				6,330
Other revenues from managed and franchised properties	4,130				3,691				3,405
Total revenues	11,272				10,502				9,735
Expenses
Owned and leased hotels	3,168				3,252				3,147
Timeshare	897				767				730
Depreciation and amortization	692				628				603
Impairment loss	9				—				—
General, administrative and other	611				491				748
	5,377				5,138				5,228
Other expenses from managed and franchised properties	4,130				3,691				3,405
Total expenses	9,507				8,829				8,633
Gain on sales of assets, net	306				—				—
Operating income	2,071				1,673				1,102
Interest income	19				10				9
Interest expense	(575		)		(618		)		(620		)
Equity in earnings from unconsolidated affiliates	23				19				16
Gain (loss) on foreign currency transactions	(41		)		26				(45		)
Gain on debt extinguishment	—				—				229
Other gain (loss), net	(1		)		37				7
Income before income taxes	1,496				1,147				698
Income tax expense	(80		)		(465		)		(238		)
Net income	1,416				682				460
Net income attributable to noncontrolling interests	(12		)		(9		)		(45		)
Net income attributable to Hilton stockholders	$	1,404			$	673			$	415
Earnings per share:
Basic	$	1.42			$	0.68			$	0.45
Diluted	$	1.42			$	0.68			$	0.45
Cash dividends declared per share	$	0.14			$	—			$	—

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

	Year Ended December 31,
	2015				2014				2013
Net income	$	1,416			$	682			$	460
Other comprehensive income (loss), net of tax benefit (expense):
Currency translation adjustment, net of tax of $(8), $(73), and $39	(134		)		(299		)		94
Pension liability adjustment, net of tax of $10, $27, and $(37)	(15		)		(45		)		60
Cash flow hedge adjustment, net of tax of $4, $5, and $(4)	(7		)		(9		)		6
Total other comprehensive income (loss)	(156		)		(353		)		160
Comprehensive income	1,260				329				620
Comprehensive income attributable to noncontrolling interests	(12		)		(14		)		(63		)
Comprehensive income attributable to Hilton stockholders	$	1,248			$	315			$	557

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Year Ended December 31,
	2015				2014				2013
Operating Activities:
Net income	$	1,416			$	682			$	460
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	692				628				603
Impairment loss	9				—				—
Gain on sales of assets, net	(306		)		—				—
Equity in earnings from unconsolidated affiliates	(23		)		(19		)		(16		)
Loss (gain) on foreign currency transactions	41				(26		)		45
Gain on debt extinguishment	—				—				(229		)
Other loss (gain), net	1				(37		)		(7		)
Share-based compensation	124				78				262
Amortization of deferred financing costs and other	38				50				25
Distributions from unconsolidated affiliates	26				22				27
Deferred income taxes	(479		)		14				65
Changes in operating assets and liabilities:
Accounts receivable, net	(47		)		(143		)		(16		)
Inventories	(39		)		56				19
Prepaid expenses	(27		)		(8		)		4
Income taxes receivable	35				(57		)		(57		)
Other current assets	32				(10		)		(8		)
Accounts payable, accrued expenses and other	59				8				132
Income taxes payable	13				10				(8		)
Change in restricted cash and cash equivalents	(13		)		59				91
Change in timeshare financing receivables	(49		)		(27		)		(15		)
Change in deferred revenues	(212		)		(179		)		592
Change in liability for guest loyalty program	64				206				139
Change in other liabilities	154				12				14
Other	(115		)		47				(21		)
Net cash provided by operating activities	1,394				1,366				2,101
Investing Activities:
Capital expenditures for property and equipment	(310		)		(268		)		(254		)
Acquisitions, net of cash acquired	(1,410		)		—				(30		)
Payments received on other financing receivables	5				20				5
Issuance of other financing receivables	(11		)		(1		)		(10		)
Investments in affiliates	(5		)		(9		)		(4		)
Distributions from unconsolidated affiliates	31				38				33
Proceeds from asset dispositions	2,205				44				—
Change in restricted cash and cash equivalents	(14		)		—				—
Contract acquisition costs	(37		)		(65		)		(44		)
Software capitalization costs	(62		)		(69		)		(78		)
Net cash provided by (used in) investing activities	392				(310		)		(382		)
Financing Activities:
Net proceeds from issuance of common stock	—				—				1,243
Borrowings	48				350				14,088
Repayment of debt	(1,624		)		(1,424		)		(17,203		)
Debt issuance costs	—				(9		)		(180		)
Change in restricted cash and cash equivalents	(10		)		5				193
Capital contribution	—				13				—
Dividends paid	(138		)		—				—
Distributions to noncontrolling interests	(8		)		(5		)		(4		)
Excess tax benefits from share-based compensation	8				—				—
Net cash used in financing activities	(1,724		)		(1,070		)		(1,863		)
Effect of exchange rate changes on cash and cash equivalents	(19		)		(14		)		(17		)
Net increase (decrease) in cash and cash equivalents	43				(28		)		(161		)
Cash and cash equivalents, beginning of period	566				594				755
Cash and cash equivalents, end of period	$	609			$	566			$	594

See notes to consolidated financial statements. For supplemental disclosures, see Note 26: "Supplemental Disclosures of Cash Flow Information."

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in millions)

	Equity Attributable to Hilton Stockholders
								Additional Paid-in Capital								Accumulated Other Comprehensive Loss
	Common Stock								Accumulated Deficit					Noncontrolling Interests				Total
	Shares			Amount
Balance as of December 31, 2012	921			$	1			$	8,452			$	(5,746	)		$	(406	)		$	(146	)		$	2,155
Issuance of common stock	64			9				1,234				—				—				—				1,243
Share-based compensation	—			—				262				—				—				—				262
Net income	—			—				—				415				—				45				460
Other comprehensive income (loss), net of tax:
Currency translation adjustment	—			—				—				—				76				18				94
Pension liability adjustment	—			—				—				—				60				—				60
Cash flow hedge adjustment	—			—				—				—				6				—				6
Other comprehensive income	—			—				—				—				142				18				160
Distributions	—			—				—				—				—				(4		)		(4		)
Balance as of December 31, 2013	985			10				9,948				(5,331		)		(264		)		(87		)		4,276
Share-based compensation	—			—				101				—				—				—				101
Net income	—			—				—				673				—				9				682
Other comprehensive income (loss), net of tax:
Currency translation adjustment	—			—				—				—				(304		)		5				(299		)
Pension liability adjustment	—			—				—				—				(45		)		—				(45		)
Cash flow hedge adjustment	—			—				—				—				(9		)		—				(9		)
Other comprehensive loss	—			—				—				—				(358		)		5				(353		)
Capital contribution	—			—				13				—				—				—				13
Equity contributions to consolidated variable interest entities	—			—				(34		)		—				(6		)		40				—
Distributions	—			—				—				—				—				(5		)		(5		)
Balance as of December 31, 2014	985			10				10,028				(4,658		)		(628		)		(38		)		4,714
Share-based compensation	2			—				115				—				—				—				115
Net income	—			—				—				1,404				—				12				1,416
Other comprehensive income (loss), net of tax:
Currency translation adjustment	—			—				—				—				(134		)		—				(134		)
Pension liability adjustment	—			—				—				—				(15		)		—				(15		)
Cash flow hedge adjustment	—			—				—				—				(7		)		—				(7		)
Other comprehensive loss	—			—				—				—				(156		)		—				(156		)
Dividends	—			—				—				(138		)		—				—				(138		)
Excess tax benefits on equity awards	—			—				8				—				—				—				8
Distributions	—			—				—				—				—				(8		)		(8		)
Balance as of December 31, 2015	987			$	10			$	10,151			$	(3,392	)		$	(784	)		$	(34	)		$	5,951

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Organization

Hilton Worldwide Holdings Inc. (the "Parent," or together with its subsidiaries, "Hilton," "we," "us," "our" or the "Company") was incorporated in Delaware on March 18, 2010 to hold, directly or indirectly, all of the equity of Hilton Worldwide, Inc. ("HWI"). The accompanying financial statements present the consolidated financial position of Hilton, which includes consolidation of HWI, which along with its subsidiaries conducts our operations. Hilton is one of the largest hospitality companies in the world based upon the number of hotel rooms and timeshare units under our distinct brands. We are engaged in owning, leasing, managing, developing and franchising hotels, resorts and timeshare properties. As of December 31, 2015, we owned, leased, managed or franchised 4,565 hotel and resort properties, totaling 751,350 rooms in 100 countries and territories, as well as 45 timeshare properties comprising 7,152 units.

On October 24, 2007, HWI became a wholly owned subsidiary of an affiliate of The Blackstone Group L.P. ("Blackstone"), following the completion of a merger (the "Merger"). In December 2013, we completed a 9,205,128-for-1 stock split on issued and outstanding shares, which is reflected in all share and per share data presented in the consolidated financial statements and accompanying notes, and an initial public offering (the "IPO"). As of December 31, 2015, Blackstone beneficially owned approximately 45.9 percent of our common stock.

Note 2: Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

Principles of Consolidation

The consolidated financial statements include the accounts of Hilton, our wholly owned subsidiaries and entities in which we have a controlling financial interest, including variable interest entities ("VIEs") where we are the primary beneficiary. Entities in which we have a controlling financial interest generally comprise majority owned real estate ownership and management enterprises.

The determination of a controlling financial interest is based upon the terms of the governing agreements of the respective entities, including the evaluation of rights held by other ownership interests. If the entity is considered to be a VIE, we determine whether we are the primary beneficiary, and then consolidate those VIEs for which we have determined we are the primary beneficiary. If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interests in the entity. We consolidate entities when we own more than 50 percent of the voting shares of a company or otherwise have a controlling financial interest.

All material intercompany transactions and balances have been eliminated in consolidation. References in these financial statements to net income (loss) attributable to Hilton stockholders and Hilton stockholders' equity (deficit) do not include noncontrolling interests, which represent the outside ownership interests of our consolidated, non-wholly owned entities and are reported separately.

Use of Estimates

The preparation of financial statements in conformity with United States of America ("U.S.") generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the amounts reported and, accordingly, ultimate results could differ from those estimates.

Summary of Significant Accounting Policies

Revenue Recognition

Revenues are primarily derived from the following sources and are generally recognized as services are rendered and when collectibility is reasonably assured. Amounts received in advance of revenue recognition are deferred as liabilities.

•	Owned and leased hotel revenues primarily consist of room rentals, food and beverage sales and other ancillary goods and services from owned, leased and consolidated non-wholly owned hotel properties. Revenues are recorded when rooms are occupied or goods and services have been delivered or rendered.

•

Management fees represent fees earned from hotels and timeshare properties that we manage, usually under long-term contracts with the property owner. Management fees from hotels usually include a base fee, which is generally a percentage of hotel revenues, and an incentive fee, which is typically based on a fixed or variable percentage of hotel profits and in some cases may be subject to a stated return threshold to the owner, normally over a one-calendar year period. Additionally, we receive one-time upfront fees upon execution of certain management contracts. We recognize base fees as revenue when earned in accordance with the terms of the management agreement. For incentive fees, we recognize those amounts that would be due if the contract was terminated at the financial statement date. One-time, upfront fees are recognized when all conditions have been substantially performed or satisfied by us. Management fees from timeshare properties are generally a fixed percent as stated in the management agreement and are recognized as the services are performed.

•

Franchise fees represent fees earned in connection with the licensing of one of our hotel brands, usually under long-term contracts with the hotel owner. We charge a monthly franchise royalty fee, generally based on a percentage of room revenue, as well as application and initiation fees for new hotels entering the system. Royalty fees for our full service brands may also include a percentage of gross food and beverage revenues and other revenues, where applicable. We also earn fees when certain franchise agreements are terminated early or there is a change in ownership. We recognize franchise fee revenue as the fees are earned, which is when all material services or conditions have been performed or satisfied.

•	Other revenues include revenues generated by the incidental support of hotel operations for owned, leased, managed and franchised hotels, including purchasing operations, and other rental income. This includes any revenues received for vendor rebate arrangements we participate in as a manager of hotel and timeshare properties.

•

Timeshare revenues consist of revenues generated from our Hilton Grand Vacations timeshare business. Timeshare revenues are principally generated from the sale and financing of fee-simple timeshare intervals deeded in perpetuity, developed either by us or by third parties. Revenue from a deeded timeshare sale is recognized when the customer has executed a binding sales contract, a minimum 10 percent down payment has been received, certain minimum sales thresholds for a timeshare project have been attained, the purchaser’s period to cancel for a refund has expired and the related receivable is deemed to be collectible. We defer revenue recognition for sales that do not meet these criteria. During periods of construction, revenue from timeshare sales is recognized under the percentage-of-completion method. One of our timeshare products is accounted for as a long-term lease with a reversionary interest, rather than the sale of a deeded interest in real estate. In this case, sales revenue is recognized on a straight-line basis over the term of the lease. Additionally, we receive sales commissions from certain third-party developers that we assist in selling their timeshare inventory. We recognize revenue from commissions on these sales as intervals are sold and we fulfill the service requirements under the respective sales agreements with the developers. Revenue from the financing of timeshare sales is recognized on the accrual method as earned based on the outstanding principal, interest rate and terms stated in each individual financing agreement. See the "Financing Receivables" section below for further discussion of the policies applicable to our timeshare financing receivables. We also generate revenues from club enrollment and other fees, rentals of timeshare units, food and beverage sales and other ancillary services at our timeshare properties that are recognized when units are rented or goods and services are delivered or rendered.

•

Other revenues from managed and franchised properties represent payroll and related costs, certain other operating costs of the managed and franchised properties’ operations, marketing expenses and other expenses associated with our brands and shared services that are contractually reimbursed to us by the property owners or paid from fees collected in advance from these properties when the costs are incurred. The corresponding expenses are presented as other expenses from managed and franchised properties in our consolidated statements of operations, resulting in no effect on operating income (loss) or net income (loss).

We are required to collect certain taxes and fees from customers on behalf of government agencies and remit these back to the applicable governmental agencies on a periodic basis. We have a legal obligation to act as a collection agent. We do not retain these taxes and fees and, therefore, they are not included in revenues. We record a liability when the amounts are collected and relieve the liability when payments are made to the applicable taxing authority or other appropriate governmental agency.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with original maturities, when purchased, of three months or less.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents include cash balances established as security for certain guarantees, lender reserves, ground rent and property tax escrows, insurance, deposits for assets we plan to acquire and advance deposits received on timeshare sales that are held in escrow until the contract is closed. For purposes of our consolidated statements of cash flows, changes in restricted cash and cash equivalents caused by changes in lender reserves due to restrictions under our loan agreements are shown as financing activities and changes caused by changes in deposits for assets we plan to acquire are shown as investing activities. The remaining changes in restricted cash and cash equivalents are the result of our normal operations, and, as such, are reflected in operating activities.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided on accounts receivable when losses are probable based on historical collection activity and current business conditions.

Inventories

Inventories comprise unsold timeshare intervals at our timeshare properties, as well as hotel inventories consisting of operating supplies that have a period of consumption of one year or less, guest room items and food and beverage items.

Timeshare inventory is carried at the lower of cost or market, based on the relative sales value or net realizable value. Capital expenditures associated with our non-lease timeshare products are reflected as inventory until the timeshare intervals are sold. Consistent with industry practice, timeshare inventory is classified as a current asset despite an operating cycle that exceeds 12 months. The majority of sales and marketing costs incurred to sell timeshare intervals are expensed when incurred. Certain direct and incremental selling and marketing costs are deferred on a contract until revenue from the interval sale has been recognized.

In accordance with the accounting standards for costs and the initial rental operations of real estate projects, we use the relative sales value method of costing our timeshare sales and relieving inventory. In addition, we continually assess our timeshare inventory and, if necessary, impose pricing adjustments to modify sales pace. It is possible that any future changes in our development and sales strategies could have a material effect on the carrying value of our timeshare inventory and purchase commitments for timeshare inventory. We monitor our projects and inventory on an ongoing basis and complete an evaluation each reporting period to ensure that the inventory and purchase commitments for inventory are at the lower of cost or market.

Hotel inventories are generally valued at the lower of cost (using "first-in, first-out", or FIFO) or net realizable value.

Property and Equipment

Property and equipment are recorded at cost, and interest applicable to major construction or development projects is capitalized. Costs of improvements that extend the economic life or improve service potential are also capitalized. Capitalized costs are depreciated over their estimated useful lives. Costs for normal repairs and maintenance are expensed as incurred.

Depreciation is recorded using the straight-line method over the assets’ estimated useful lives, which are generally as follows: buildings and improvements (8 to 40 years), furniture and equipment (3 to 8 years) and computer equipment and acquired software (3 years). Leasehold improvements are depreciated over the shorter of the estimated useful life, based on the estimates above, or the lease term.

We evaluate the carrying value of our property and equipment if there are indicators of potential impairment. We perform an analysis to determine the recoverability of the asset’s carrying value by comparing the expected undiscounted future cash flows to the net book value of the asset. If it is determined that the expected undiscounted future cash flows are less than the net book value of the asset, the excess of the net book value over the estimated fair value is recorded in our consolidated statements of operations within impairment losses. Fair value is generally estimated using valuation techniques that consider the discounted cash flows of the asset using discount and capitalization rates deemed reasonable for the type of asset, as well as prevailing market conditions, appraisals, recent similar transactions in the market and, if appropriate and available, current estimated net sales proceeds from pending offers.

If sufficient information exists to reasonably estimate the fair value of a conditional asset retirement obligation, including environmental remediation liabilities, we recognize the fair value of the obligation when the obligation is incurred, which is generally upon acquisition, construction or development and/or through the normal operation of the asset.

Business Combinations

We consider a business combination to occur when the Company takes control of a business by acquiring its net assets or equity interests. We record the assets acquired, liabilities assumed and noncontrolling interests at fair value as of the acquisition date, including any contingent consideration. We evaluate several factors, including market data for similar assets, expected future cash flows discounted at risk-adjusted rates and replacement cost for the assets to determine an appropriate fair value of the assets. Acquisition-related costs, such as due diligence, legal and accounting fees, are expensed in the period incurred and are not capitalized or applied in determining the fair value of the acquired assets.

Assets Held for Sale

We classify a property as held for sale when we commit to a plan to sell the asset, the sale of the asset is probable within one year and it is unlikely the actions to complete the sale will change or that the sale will be withdrawn. When we determine that classification of an asset as held for sale is appropriate, we cease recording depreciation for the asset. Further, the related assets and liabilities of the held for sale property will be classified as assets held for sale in our consolidated balance sheets. Any gains on sales of properties are recognized at the time of sale or deferred and recognized in net income (loss) in subsequent periods as any relevant conditions requiring deferral are satisfied.

Financing Receivables

We define financing receivables as financing arrangements that represent a contractual right to receive money either on demand or on fixed or determinable dates, which are recognized as an asset in our consolidated balance sheets. We record all financing receivables at amortized cost in current and long-term financing receivables. We recognize interest income as earned and provide an allowance for cancellations and defaults. We have divided our financing receivables into two portfolio segments based on the level of aggregation at which we develop and document a systematic methodology to determine the allowance for credit losses. Based on their initial measurement, risk characteristics and our method for monitoring and assessing credit risk, we have determined the classes of financing receivables to correspond to our identified portfolio segments as follows:

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Timeshare financing receivables comprise loans related to our financing of timeshare interval sales and secured by the underlying timeshare properties. We determine our timeshare financing receivables to be past due based on the contractual terms of the individual mortgage loans. We recognize interest income on our timeshare financing receivables as earned. The interest rate charged on the notes correlates to the risk profile of the borrower at the time of purchase and the percentage of the purchase that is financed, among other factors. We monitor the credit quality of our receivables on an ongoing basis. We evaluate this portfolio collectively for uncollectibility, since we hold a large group of homogeneous timeshare financing receivables, which are individually immaterial. We record this estimate of uncollectibility as a reduction of sales revenue at the time revenue is recognized on a timeshare interval sale. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. With the exception of the financing provided to customers of our timeshare business, we do not normally require collateral or other security to support credit sales. We use a technique referred to as static pool analysis as the basis for determining our general reserve requirements on our timeshare financing receivables. The adequacy of the related allowance is determined by management through analysis of several factors, such as current economic conditions and industry trends, as well as the specific risk characteristics of the portfolio including assumed default rates, aging and historical write-offs of these receivables. The allowance is maintained at a level deemed adequate by management based on a periodic analysis of the mortgage portfolio. Once a note is 90 days past due or is determined to be uncollectible prior to 90 days past due, we cease accruing interest and reverse the accrued interest recognized up to that point. We apply payments we receive for loans, including those in non-accrual status, to amounts due in the following order: servicing

fees, late charges, interest and principal. We resume interest accrual for loans for which we had previously ceased accruing interest once the loan is less than 90 days past due. We fully reserve for a timeshare financing receivable in the month following the date that the loan is 120 days past due and, subsequently, we write off the uncollectible note against the reserve once the foreclosure process is complete and we receive the deed for the foreclosed unit.

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Other financing receivables primarily comprise individual loans and other types of unsecured financing arrangements provided to hotel owners. We individually assess all financing receivables in this portfolio for collectibility and impairment. We measure loan impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate. For impaired loans, we establish a specific impairment reserve for the difference between the recorded investment in the loan and the present value of the expected future cash flows. We do not recognize interest income on unsecured financing to hotel owners for notes that are greater than 90 days past due and only resume interest recognition if the financing receivable becomes current. We fully reserve unsecured financing to hotel owners when we determine that the receivables are uncollectible and when all commercially reasonable means of recovering the receivable balances have been exhausted.

Investments in Affiliates

We hold investments in affiliates that primarily own or lease hotels under one of our distinct hotel brands. If we do not have a controlling financial interest in the entity, we account for the investment using the equity or cost method. We account for investments using the equity method when we have the ability to exercise significant influence over the entity, typically through a more than minimal investment. Investments in affiliates where we own less than a minimal investment and are not able to exercise significant influence are accounted for under the cost method.

Our proportionate share of earnings (losses) from our equity method investments is presented as equity in earnings (losses) from unconsolidated affiliates in our consolidated statements of operations. Distributions from investments in unconsolidated entities are presented as an operating activity in our consolidated statements of cash flows when such distributions are a return on investment. Distributions from unconsolidated affiliates are recorded as an investing activity in our consolidated statements of cash flows when such distributions are a return of investment.

We assess the recoverability of our equity method and cost method investments if there are indicators of potential impairment. If an identified event or change in circumstances requires an evaluation to determine if an investment may have an other-than-temporary impairment, we assess the fair value of the investment based on accepted valuation methodologies, which include discounted cash flows, estimates of sales proceeds and external appraisals. If an investment’s fair value is below its carrying value and the decline is considered to be other-than-temporary, we will recognize an impairment loss in equity in earnings (losses) from unconsolidated affiliates for equity method investments or impairment losses for cost method investments in our consolidated statements of operations.

In connection with the Merger, we recorded our equity method investments at their estimated fair value, which resulted in an increase to our historical basis in those entities, primarily as a result of an increase in the fair value of the real estate assets of the investee entities. The basis difference is being amortized as a component of equity in earnings (losses) from unconsolidated affiliates over a period of approximately 40 years.

Goodwill

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. We do not amortize goodwill, but rather evaluate goodwill for potential impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is below the carrying amount.

As part of the Merger, we recorded goodwill representing the excess purchase price over the fair value of the other identified assets and liabilities. We review the carrying value of our goodwill by comparing the carrying value of our reporting units to their fair value. Our reporting units are the same as our operating segments as described in Note 23: "Business Segments". We perform this evaluation annually or at an interim date if indicators of impairment exist. In any year we may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If we cannot determine qualitatively that the fair value is in excess of the carrying value, or we decide to bypass the qualitative assessment, we proceed to the two-step quantitative process. In the first step, we determine the fair value of each of our reporting units. The valuation is based on internal projections of expected future cash flows and operating plans, as well as market conditions relative to the operations of our reporting units. If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment

test is not necessary. However, if the carrying amount of a reporting unit exceeds its estimated fair value, then the second step must be performed. In the second step, we estimate the implied fair value of goodwill, which is determined by taking the fair value of the reporting unit and allocating it to all of its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, the excess is recognized within impairment losses in our consolidated statements of operations.

Brands

We own, operate and franchise hotels under our portfolio of brands. There are no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of these brands and, accordingly, the useful lives of these brands are considered to be indefinite. Our hotel brand portfolio includes Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Hilton Hotels & Resorts, Curio - A Collection by Hilton, DoubleTree by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton. In addition, we also develop and operate timeshare properties under our Hilton Grand Vacations brand.

At the time of the Merger, our brands were assigned a fair value based on a common valuation technique known as the relief from royalty approach. Canopy by Hilton, Curio - A Collection by Hilton and Home2 Suites by Hilton were launched post-Merger and, as such, they were not assigned fair values. We evaluate our brands for impairment on an annual basis or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value of the brand is below the carrying value. If we cannot determine qualitatively that the fair value is in excess of the carrying value, or we decide to bypass the qualitative assessment, we proceed to the two-step quantitative process. If a brand’s estimated current fair value is less than its respective carrying value, the excess of the carrying value over the estimated fair value is recognized in our consolidated statements of operations within impairment losses.

Intangible Assets with Finite Useful Lives

We have certain finite lived intangible assets that were initially recorded at their fair value at the time of the Merger. These intangible assets consist of management agreements, franchise contracts, leases, certain proprietary technologies and our guest loyalty program, Hilton HHonors. Additionally, we capitalize direct and incremental management and franchise contract acquisition costs as finite-lived intangible assets. Intangible assets with finite useful lives are amortized using the straight-line method over their respective estimated useful lives.

We capitalize costs incurred to develop internal-use computer software. Internal and external costs incurred in connection with development of upgrades or enhancements that result in additional functionality are also capitalized. These capitalized costs are amortized on a straight-line basis over the estimated useful life of the software. These capitalized costs are recorded in other intangible assets in our consolidated balance sheets.

We review all finite lived intangible assets for impairment when circumstances indicate that their carrying amounts may not be recoverable. If the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess of carrying value over the fair value in our consolidated statements of operations.

Hilton HHonors

Hilton HHonors is a guest loyalty program provided to hotels and timeshare properties. Most of our owned, leased, managed and franchised hotels and timeshare properties participate in the Hilton HHonors program. Hilton HHonors members earn points based on their spending at our participating hotels and timeshare properties and through participation in affiliated partner programs. When points are earned by Hilton HHonors members, the property or affiliated partner pays Hilton HHonors based on an estimated cost per point for the costs of operating the program, which include marketing, promotion, communication, administration and the estimated cost of award redemptions. Hilton HHonors member points are accumulated and may be redeemed for certificates that entitle the holder to the right to stay at participating properties, as well as other opportunities with third parties, including, but not limited to, airlines, car rentals, cruises, vacation packages, shopping and dining. We provide Hilton HHonors as a marketing program to participating hotels and timeshare properties, with the objective of operating the program on a break-even basis to us.

Hilton HHonors defers revenue received from participating hotels and program partners in an amount equal to the estimated cost per point of the future redemption obligation. We engage outside actuaries to assist in determining the fair value of the future award redemption obligation using statistical formulas that project future point redemptions based on factors that include historical experience, an estimate of "breakage" (points that will never be redeemed), an estimate of the points that will

eventually be redeemed and the cost of reimbursing hotels and other third parties in respect to other redemption opportunities available to members. Revenue is recognized by participating hotels and resorts only when points that have been redeemed for hotel stay certificates are used by members or their designees at the respective properties. Additionally, when members of the Hilton HHonors loyalty program redeem award certificates at our owned and leased hotels, we recognize room revenue, included in owned and leased hotels revenues in our consolidated statements of operations.

Fair Value Measurements - Valuation Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (an exit price). We use the three-level valuation hierarchy for classification of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our own assumptions about the data market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized below:

•	Level 1 - Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

•	Level 2 - Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument.

•	Level 3 - Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety. Proper classification of fair value measurements within the valuation hierarchy is considered each reporting period. The use of different market assumptions or estimation methods may have a material effect on the estimated fair value amounts.

Derivative Instruments

We use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates and foreign currency exchange rates. We regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. Under the terms of certain loan agreements, we are required to maintain derivative financial instruments to manage interest rates. We do not enter into derivative financial instruments for trading or speculative purposes.

We record all derivatives at fair value. On the date the derivative contract is entered, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid ("cash flow hedge"), a hedge of the fair value of a recognized asset or liability ("fair value hedge"), a hedge of our foreign currency exposure ("net investment hedge") or an undesignated hedge instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge or net investment hedge are recorded in other comprehensive income (loss) in the consolidated statements of comprehensive income (loss) until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the consolidated statements of cash flows. Cash flows from undesignated derivative financial instruments are included as an investing activity in our consolidated statements of cash flows.

If we determine that we qualify for and will designate a derivative as a hedging instrument, at the designation date we formally document all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions. This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions, linking all derivatives designated as fair value hedges to specific assets and liabilities in our consolidated balance sheets and determining the foreign currency exposure of the net investment of the foreign operation for a net investment hedge.

On a quarterly basis, we assess the effectiveness of our designated hedges in offsetting the variability in the cash flows or fair values of the hedged assets or obligations using the Hypothetical Derivative Method. This method compares the cumulative change in fair value of each hedging instrument to the cumulative change in fair value of a hypothetical hedging instrument, which has terms that identically match the critical terms of the respective hedged transactions. Thus, the hypothetical hedging instrument is presumed to perfectly offset the hedged cash flows. Ineffectiveness results when the cumulative change in the fair value of the hedging instrument exceeds the cumulative change in the fair value of the hypothetical hedging instrument. We discontinue hedge accounting prospectively, when the derivative is not highly effective as a hedge, the underlying hedged transaction is no longer probable, or the hedging instrument expires, is sold, terminated or exercised.

Currency Translation

The United States dollar ("USD") is our reporting currency and is the functional currency of our consolidated and unconsolidated entities operating in the U.S. The functional currency for our consolidated and unconsolidated entities operating outside of the U.S. is the currency of the primary economic environment in which the respective entity operates. Assets and liabilities measured in foreign currencies are translated into USD at the prevailing exchange rates in effect as of the financial statement date and the related gains and losses, net of applicable deferred income taxes, are reflected in accumulated other comprehensive income (loss) in our consolidated balance sheets. Income and expense accounts are translated at the average exchange rate for the period. Gains and losses from foreign exchange rate changes related to transactions denominated in a currency other than an entity's functional currency or intercompany receivables and payables denominated in a currency other than an entity’s functional currency that are not of a long-term investment nature are recognized as gain (loss) on foreign currency transactions in our consolidated statements of operations. Where certain specific evidence indicates intercompany receivables and payables will not be settled in the foreseeable future and are of a long-term nature, gains and losses from foreign exchange rate changes are recognized as other comprehensive income (loss) in our consolidated statements of comprehensive income (loss).

Self-Insurance

We are self-insured or assume deductibles for various levels of general liability, auto liability and workers’ compensation at our owned properties. Additionally, the majority of employees at managed hotels, of which we are the employer, participate in our general liability and auto liability programs. We purchase insurance coverage for claim amounts that exceed our self-insured or deductible obligations. Our insurance reserves are accrued based on estimates of the ultimate cost of claims that occurred during the covered period, which includes claims incurred but not reported, for which we will be responsible. These estimates are prepared with the assistance of outside actuaries and consultants. The ultimate cost of claims for a covered period may differ from our original estimates.

Share-based Compensation

As part of our 2013 Omnibus Incentive Plan (the "Stock Plan"), which was adopted on December 11, 2013, we award time-vesting restricted stock units ("RSUs"), nonqualified stock options ("options"), performance-vesting restricted stock units and restricted stock (collectively, "performance shares") and deferred share units ("DSUs") to eligible employees and directors.

•	RSUs generally vest in annual installments over two or three years from the date of grant. Vested RSUs generally will be settled for our common stock, with the exception of certain awards that will be settled in cash. The grant date fair value is equal to the closing stock price on the date of grant.

•	Options vest over three years in equal annual installments from the date of grant and will terminate 10 years from the date of grant or earlier if the individual’s service terminates. The exercise price is equal to the closing price of the Company’s common stock on the date of grant. The grant date fair value is estimated using the Black-Scholes-Merton Model.

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Performance shares are settled at the end of a three-year performance period with 50 percent of the shares subject to achievement based on a measure of (1) the Company’s total shareholder return relative to the total shareholder return of members of a peer company group ("relative shareholder return") and the other 50 percent of the shares subject to achievement based on (2) the Company’s earnings before interest expense, income tax and depreciation and amortization ("EBITDA") compound annual growth rate ("EBITDA CAGR"). The total number of performance shares that vest based on each performance measure (relative shareholder return and EBITDA CAGR) is based on an achievement factor that in each case, ranges from a zero to 200 percent payout. The grant date fair value of the relative shareholder return awards is estimated using the Monte Carlo Simulation, and the grant date fair value for the EBITDA CAGR awards is equal to the closing stock price on the date of grant.

•	DSUs are issued to our independent directors and are fully vested and non-forfeitable on the date of grant. DSUs are settled for shares of our common stock, which are deliverable upon the earlier of termination of the individual's service on our Board of Directors or a change in control. The grant date fair value is equal to the closing stock price on the date of grant.

We recognize the cost of services received in these share-based payment transactions with employees as services are received and recognize either a corresponding increase in additional paid-in capital or accounts payable, accrued expenses and other in our consolidated balance sheets, depending on whether the instruments granted satisfy the equity or liability classification criteria. The measurement objective for these equity awards is the estimated fair value at the grant date of the equity instruments that we are obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The compensation expense for an award classified as an equity instrument is recognized ratably over the requisite service period, including an estimate of forfeitures. The requisite service period is the period during which an employee is required to provide service in exchange for an award. Liability awards are measured based on the award’s fair value, and the fair value is remeasured at each reporting date until the date of settlement. Compensation expense for each period until settlement is based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered at the reporting date) in the fair value of the instrument for each reporting period, including an estimate of forfeitures. Forfeiture rates are estimated based on historical employee terminations for each grant cycle. Compensation expense for awards with performance conditions is recognized over the requisite service period if it is probable that the performance condition will be satisfied. If such performance conditions are not considered probable until they occur, no compensation expense for these awards is recognized.

Income Taxes

We account for income taxes using the asset and liability method. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year, to recognize the deferred tax assets and liabilities that relate to tax consequences in future years, which result from differences between the respective tax basis of assets and liabilities and their financial reporting amounts, and tax loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the respective temporary differences or operating loss or tax credit carry forwards are expected to be recovered or settled. The realization of deferred tax assets and tax loss and tax credit carry forwards is contingent upon the generation of future taxable income and other restrictions that may exist under the tax laws of the jurisdiction in which a deferred tax asset exists. Valuation allowances are provided to reduce such deferred tax assets to amounts more likely than not to be ultimately realized.

We use a prescribed recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. For all income tax positions, we first determine whether it is "more-likely-than-not" that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. If it is determined that a position meets the more-likely-than-not recognition threshold, the benefit recognized in the financial statements is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement.

Recently Issued Accounting Pronouncements

Adopted Accounting Standards

In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17 ("ASU 2015-17"), Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This ASU requires all deferred tax assets and liabilities to be classified as non-current in the statement of financial position. The provisions of ASU 2015-17 are effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period. We have elected, as permitted by the standard, to early adopt ASU 2015-17 on a prospective basis as of October 1, 2015 and prior periods were not restated. The adoption did not have a material effect on our consolidated financial position or results of operations.

In September 2015, the FASB issued ASU No. 2015-16 ("ASU 2015-16"), Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. This ASU requires adjustments to provisional amounts that are identified during the measurement period of a business combination to be recognized in the reporting period in which the adjustment amounts are determined. Acquirers are no longer required to revise comparative information for prior periods as if the accounting for the business combination had been completed as of the acquisition date. The provisions of ASU 2015-16 are effective for reporting periods beginning after December 15, 2015. We have elected, as permitted by the standard, to early

adopt ASU 2015-16 on a prospective basis as of October 1, 2015. The adoption did not have an effect on our consolidated financial position or results of operations.

Accounting Standards Not Yet Adopted

In February 2016, the FASB issued ASU No. 2016-02 ("ASU 2016-02"), Leases (Topic 842), which supersedes existing guidance on accounting for leases in "Leases (Topic 840)" and generally requires all leases to be recognized in the statement of financial position. The provisions of ASU 2016-02 are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of this ASU are to be applied using a modified retrospective approach. We are currently evaluating the effect that this ASU will have on our consolidated financial statements.

In May 2015, the FASB issued ASU No. 2015-07 ("ASU 2015-07"), Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent). This ASU removes the requirement to categorize the investments for which fair value is measured using net asset value per share within the fair value hierarchy. The provisions of ASU 2015-07 are effective for reporting periods beginning after December 15, 2015 and are to be applied retrospectively; early adoption is permitted. The adoption is not expected to have a material effect on our consolidated financial position or results of operations.

In February 2015, the FASB issued ASU No. 2015-02 ("ASU 2015-02"), Consolidation (Topic 810) - Amendments to the Consolidation Analysis. This ASU modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The provisions of ASU 2015-02 are effective for reporting periods beginning after December 15, 2015; early adoption is permitted. We expect to adopt ASU 2015-02 in the first quarter of 2016 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of January 1, 2016. The adoption is not expected to have a material effect on our consolidated financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09 ("ASU 2014-09"), Revenue from Contracts with Customers (Topic 606). This ASU supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)," and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU No. 2015-14 ("ASU 2015-14"), Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 for reporting periods beginning after December 15, 2016 to reporting periods beginning after December 15, 2017. The provisions of this ASU are to be applied retrospectively; early adoption is permitted for reporting periods beginning after December 15, 2016. We are currently evaluating the effect that this ASU will have on our consolidated financial statements and our method of adoption. We do not plan on adopting prior to January 1, 2018.

Note 3: Acquisitions

Tax Deferred Exchange

During the year ended December 31, 2015, we used proceeds from the sale of the Waldorf Astoria New York (see Note 4: "Disposals") to acquire, as part of a tax deferred exchange of real property, the following properties from sellers affiliated with Blackstone and an unrelated third party, for a total purchase price of $1.87 billion:

•	the resort complex consisting of the Waldorf Astoria Orlando and the Hilton Orlando Bonnet Creek in Orlando, Florida (the "Bonnet Creek Resort");

•	the Casa Marina Resort in Key West, Florida;

•	the Reach Resort in Key West, Florida;

•	the Parc 55 in San Francisco, California; and

•	the Juniper Hotel Cupertino in Cupertino, California.

We incurred transaction costs of $26 million recognized in other gain (loss), net in our consolidated statement of operations for the year ended December 31, 2015.

As of the acquisition dates, the fair values of the assets acquired and liabilities assumed were as follows:

	(in millions)
Cash and cash equivalents	$	16
Restricted cash and cash equivalents	8
Inventories	1
Prepaid expenses	3
Other current assets	1
Property and equipment	1,868
Other intangible assets	4
Accounts payable, accrued expenses and other	(25		)
Long-term debt	(450		)
Net assets acquired	$	1,426

These fair values are subject to adjustments as additional information relative to the fair values at the acquisition date becomes available through the measurement period, which can extend for up to one year after the acquisition date. We do not expect any material further adjustments to the fair values of these acquisitions. See Note 16: "Fair Value Measurements" for additional details on the fair value techniques and inputs used for the measurement of the assets and liabilities.

The results of operations from these properties included in the consolidated statement of operations for the year ended December 31, 2015 were as follows:

	(in millions)
Total revenues	$	316
Income before income taxes	58

Equity Investments Exchange

During the year ended December 31, 2014, we entered into an agreement to exchange our ownership interest in six hotels for the remaining interest in five other hotels that were part of an equity investment portfolio we owned with one other partner. As a result of this exchange, we have a 100 percent ownership interest in five hotels and no longer have any ownership interest in the remaining six hotels. This transaction was accounted for as a business combination achieved in stages, resulting in a remeasurement gain based upon the fair values of the equity investments. The carrying values of these equity investments immediately before the exchange totaled $59 million and the fair values of these equity investments immediately before the exchange totaled $83 million, resulting in a pre-tax gain of $23 million, net of transaction costs, recognized in other gain (loss), net in our consolidated statement of operations for the year ended December 31, 2014. See Note 16: "Fair Value Measurements" for additional details on the fair value techniques and inputs used for the measurement of the assets and liabilities.

Acquisition of Other Property and Equipment

During the year ended December 31, 2013, we purchased the land and building associated with a hotel, which we previously leased under a capital lease, for a cash payment of British pound ("GBP") 9 million, or approximately $15 million. As a result of the acquisition, we released our capital lease obligation of $17 million and recognized a gain of $2 million that was included in other gain (loss), net in our consolidated statement of operations for the year ended December 31, 2013. Also during the year ended December 31, 2013, we acquired a parcel of land for $28 million, which we previously leased under a long-term ground lease.

Note 4: Disposals

Hilton Sydney

In July 2015, we completed the sale of the Hilton Sydney for a purchase price of 442 million Australian dollars ("AUD") (equivalent to $340 million as of the closing date). As a result of the sale, we recognized a pre-tax gain of $163 million included in gain on sales of assets, net in our consolidated statement of operations for the year ended December 31, 2015. The pre-tax gain was net of transaction costs, a goodwill reduction of $36 million and reclassification of a currency translation adjustment of $25 million from accumulated other comprehensive loss into earnings concurrent with the disposition. The goodwill reduction was due to our consideration of the Hilton Sydney property as a business within our ownership segment;

therefore, we reduced the carrying amount of our goodwill by the amount representing the fair value of the business disposed relative to the fair value of the portion of our ownership reporting unit goodwill that was retained.

Waldorf Astoria New York

In February 2015, we completed the sale of the Waldorf Astoria New York for a purchase price of $1.95 billion and we repaid in full the existing mortgage loan secured by our Waldorf Astoria New York property (the "Waldorf Astoria Loan") of approximately $525 million. As a result of the sale, we recognized a gain of $143 million included in gain on sales of assets, net in our consolidated statement of operations for the year ended December 31, 2015. The gain was net of transaction costs and a goodwill reduction of $185 million. The goodwill reduction was due to our consideration of the Waldorf Astoria New York property as a business within our ownership segment; therefore, we reduced the carrying amount of our goodwill by the amount representing the fair value of the business disposed relative to the fair value of the portion of our ownership reporting unit goodwill that was retained. Additionally, we recognized a loss of $6 million in other gain (loss), net in our consolidated statement of operations for the year ended December 31, 2015 related to the reduction of the Waldorf Astoria Loan's remaining carrying amount of debt issuance costs.

Sale of Other Property and Equipment

During the year ended December 31, 2014, we completed the sale of two hotels and a vacant parcel of land for approximately $15 million. As a result of these sales, we recognized a pre-tax gain of $13 million, including the reclassification of a currency translation adjustment of $3 million, from accumulated other comprehensive loss concurrent with the disposition. The gain was included in other gain (loss), net in our consolidated statement of operations for the year ended December 31, 2014. Additionally, during the year ended December 31, 2014, we completed the sale of certain land and easement rights to an affiliate of Blackstone in connection with a timeshare project. As a result, the affiliate of Blackstone acquired the rights to the name, plans, designs, contracts and other documents related to the timeshare project. The total consideration received for this transaction was approximately $37 million. We recognized $13 million, net of tax, as a capital contribution within additional paid-in capital, representing the excess of the fair value of the consideration received over the carrying value of the assets sold.

Sale of Investments in Affiliates

During the year ended December 31, 2013, we completed the sale of our 25 percent equity interest in a joint venture entity that owned a hotel for $17 million. As a result of the sale, we recognized a pre-tax loss of $1 million, including the reclassification of a currency translation adjustment of $14 million, which was previously recognized in accumulated other comprehensive loss. The loss was included in other gain (loss), net in our consolidated statement of operations for the year ended December 31, 2013.

Note 5: Inventories

Inventories were as follows:

	December 31,
	2015				2014
	(in millions)
Timeshare	$	420			$	380
Hotel	22				24
	$	442			$	404

Note 6: Property and Equipment

Property and equipment were as follows:

	December 31,
	2015				2014
	(in millions)
Land	$	3,486			$	3,009
Buildings and leasehold improvements	6,410				5,150
Furniture and equipment	1,263				1,140
Construction-in-progress	80				53
	11,239				9,352
Accumulated depreciation and amortization	(2,120		)		(1,869		)
	$	9,119			$	7,483

Depreciation and amortization expense on property and equipment, including amortization of assets recorded under capital leases, was $351 million, $313 million and $318 million during the years ended December 31, 2015, 2014 and 2013, respectively.

As of December 31, 2015 and 2014, property and equipment included approximately $144 million and $149 million, respectively, of capital lease assets primarily consisting of buildings and leasehold improvements, net of $71 million and $64 million, respectively, of accumulated depreciation and amortization.

Note 7: Financing Receivables

Financing receivables were as follows:

	December 31, 2015
	Securitized Timeshare				Unsecuritized Timeshare(1)				Other				Total
	(in millions)
Financing receivables	$	309			$	632			$	39			$	980
Less: allowance	(14		)		(79		)		—				(93		)
	295				553				39				887
Current portion of financing receivables	58				83				1				142
Less: allowance	(3		)		(10		)		—				(13		)
	55				73				1				129
Total financing receivables	$	350			$	626			$	40			$	1,016

	December 31, 2014
	Securitized Timeshare				Unsecuritized Timeshare(1)				Other				Total
	(in millions)
Financing receivables	$	430			$	454			$	22			$	906
Less: allowance	(24		)		(58		)		(2		)		(84		)
	406				396				20				822
Current portion of financing receivables	66				74				2				142
Less: allowance	(4		)		(10		)		—				(14		)
	62				64				2				128
Total financing receivables	$	468			$	460			$	22			$	950

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(1)	Included in this balance, we had $163 million and $164 million of gross timeshare financing receivables secured under our revolving non-recourse timeshare financing receivables credit facility (the "Timeshare Facility"), as of December 31, 2015 and 2014, respectively.

Timeshare Financing Receivables

As of December 31, 2015, we had 53,697 timeshare financing receivables with interest rates ranging from zero percent to 20.50 percent, a weighted average interest rate of 11.88 percent, a weighted average remaining term of 7.6 years and maturities through 2026.

In June 2014, we completed a securitization of approximately $357 million of gross timeshare financing receivables and issued approximately $304 million of 1.77 percent notes and approximately $46 million of 2.07 percent notes, which have a stated maturity date in November 2026. The securitization transaction did not qualify as a sale for accounting purposes and, accordingly, no gain or loss was recognized. The proceeds from the transaction are presented as debt (together with all securitization transactions, the "Securitized Timeshare Debt"). See Note 12: "Debt" for additional details.

Our timeshare financing receivables as of December 31, 2015 mature as follows:

	Securitized Timeshare				Unsecuritized Timeshare
Year	(in millions)
2016	$	58			$	83
2017	59				70
2018	59				72
2019	55				74
2020	50				75
Thereafter	86				341
	367				715
Less: allowance	(17		)		(89		)
	$	350			$	626

As of December 31, 2015 and 2014, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $32 million and $31 million, respectively. The following table details an aged analysis of our gross timeshare financing receivables balance:

	December 31,
	2015				2014
	(in millions)
Current	$	1,035			$	980
30 - 89 days past due	15				13
90 - 119 days past due	4				2
120 days and greater past due	28				29
	$	1,082			$	1,024

The changes in our allowance for uncollectible timeshare financing receivables were as follows:

	(in millions)
Balance as of December 31, 2012	$	93
Write-offs	(25		)
Provision for uncollectibles on sales	24
Balance as of December 31, 2013	92
Write-offs	(30		)
Provision for uncollectibles on sales	34
Balance as of December 31, 2014	96
Write-offs	(29		)
Provision for uncollectibles on sales	39
Balance as of December 31, 2015	$	106

Note 8: Investments in Affiliates

Investments in affiliates were as follows:

	December 31,
	2015				2014
	(in millions)
Equity investments	$	129			$	153
Other investments	9				17
	$	138			$	170

We maintain investments in affiliates accounted for under the equity method, which are primarily investments in entities that owned or leased 16 hotels as of December 31, 2015 and 2014. These entities had total debt of approximately $966 million and $929 million as of December 31, 2015 and 2014, respectively. Substantially all of the debt is secured solely by the affiliates' assets or is guaranteed by other partners without recourse to us.

Note 9: Consolidated Variable Interest Entities

As of December 31, 2015 and 2014, we consolidated five VIEs: two that lease hotels from unconsolidated affiliates in Japan; two that are associated with our timeshare financing receivables securitization transactions that issued the Securitized Timeshare Debt; and one that owns a hotel in the U.S. We are the primary beneficiaries of these VIEs as we have the power to direct the activities that most significantly affect their economic performance. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. The assets of our VIEs are only available to settle the obligations of the respective entities. Our consolidated balance sheets included the assets and liabilities of these entities, which primarily comprised the following:

	December 31,
	2015				2014
	(in millions)
Cash and cash equivalents	$	46			$	27
Restricted cash and cash equivalents	15				22
Accounts receivable, net	19				18
Property and equipment, net	72				77
Securitized financing receivables, net	350				468
Deferred income tax assets	62				79
Other non-current assets	52				56
Accounts payable, accrued expenses and other	35				33
Non-recourse debt	575				729

During the years ended December 31, 2015, 2014 and 2013, we did not provide any financial or other support to any VIEs that we were not previously contractually required to provide, nor do we intend to provide such support in the future.

In June 2015, one of our consolidated VIEs in Japan modified the terms of its capital lease, resulting in a reduction in non-recourse debt of $24 million. This amount was recognized as a gain in other gain (loss), net in our consolidated statement of operations during the year ended December 31, 2015, as the leased asset had previously been fully impaired.

Note 10: Goodwill and Intangible Assets

Goodwill

Our goodwill balances, by reporting unit, were as follows:

	Ownership				Management and Franchise				Total
	(in millions)
Goodwill	$	4,563			$	5,184			$	9,747
Accumulated impairment losses	(3,527		)		—				(3,527		)
Balance as of December 31, 2013	1,036				5,184				6,220
Foreign currency translation	(11		)		(55		)		(66		)
Goodwill	4,552				5,129				9,681
Accumulated impairment losses	(3,527		)		—				(3,527		)
Balance as of December 31, 2014	1,025				5,129				6,154
Dispositions of business(1)	(221		)		—				(221		)
Foreign currency translation	(4		)		(42		)		(46		)
Goodwill	3,575				5,087				8,662
Accumulated impairment losses	(2,775		)		—				(2,775		)
Balance as of December 31, 2015	$	800			$	5,087			$	5,887

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(1) In connection with the sales of the Waldorf Astoria New York and the Hilton Sydney, goodwill was reduced by $973 million and accumulated impairment losses was reduced by $752 million. See Note 4: "Disposals" for further discussion.

Intangible Assets

Intangible assets were as follows:

	December 31, 2015
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
	(in millions)
Amortizing Intangible Assets:
Management and franchise agreements	$	2,616			$	(1,467	)		$	1,149
Leases	390				(156		)		234
Capitalized software	468				(293		)		175
Hilton HHonors	341				(174		)		167
Other	38				(28		)		10
	$	3,853			$	(2,118	)		$	1,735
Non-amortizing Intangible Assets:
Brands	$	4,919			$	—			$	4,919

	December 31, 2014
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
	(in millions)
Amortizing Intangible Assets:
Management and franchise agreements	$	2,609			$	(1,303	)		$	1,306
Leases	410				(144		)		266
Capitalized software	409				(201		)		208
Hilton HHonors	345				(155		)		190
Other	34				(24		)		10
	$	3,807			$	(1,827	)		$	1,980
Non-amortizing Intangible Assets:
Brands	$	4,963			$	—			$	4,963

We recorded amortization expense of $341 million, $315 million and $285 million for the years ended December 31, 2015, 2014 and 2013, respectively, including $94 million, $79 million and $52 million, respectively, of amortization expense on capitalized software. Changes to our brands intangible asset during the years ended December 31, 2015 and 2014 were due to foreign currency translations.

We estimate our future amortization expense for our amortizing intangible assets to be as follows:

Year	(in millions)
2016	$	323
2017	283
2018	255
2019	233
2020	195
Thereafter	446
	$	1,735

Note 11: Accounts Payable, Accrued Expenses and Other

Accounts payable, accrued expenses and other were as follows:

	December 31,
	2015				2014
	(in millions)
Accrued employee compensation and benefits	$	475			$	475
Accounts payable	331				299
Liability for guest loyalty program, current	494				449
Deposit liabilities	212				201
Deferred revenues, current	65				52
Self-insurance reserves, current	90				82
Current liabilities related to assets held for sale	—				36
Other accrued expenses	539				505
	$	2,206			$	2,099

Deferred revenues and deposit liabilities are related to our timeshare business and hotel operations. Other accrued expenses consist of taxes, rent, interest and other accrued balances.

Note 12: Debt

Long-term Debt

Long-term debt balances, including obligations for capital leases, and associated interest rates as of December 31, 2015 were as follows:

	December 31,
	2015				2014
	(in millions)
Senior secured term loan facility with a rate of 3.50%, due 2020	$	4,225			$	5,000
Senior notes with a rate of 5.625%, due 2021	1,500				1,500
Commercial mortgage-backed securities loan with an average rate of 4.11%, due 2018(1)	3,418				3,487
Mortgage loans with an average rate of 4.13%, due 2016 to 2022(2)	584				721
Other unsecured notes with a rate of 7.50%, due 2017	54				54
Capital lease obligations with an average rate of 6.54%, due 2018 to 2097	57				72
	9,838				10,834
Less: current maturities of long-term debt	(111		)		(10		)
Less: unamortized discount on senior secured term loan facility	(17		)		(21		)
	$	9,710			$	10,803

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(1)	The current maturity date of the variable-rate component of this borrowing is November 1, 2016. We have assumed all extensions, which are solely at our option, were exercised.

(2)	For mortgage loans with maturity date extensions that are solely at our option, we assumed they were exercised.

Senior Secured Credit Facility

In 2013, we entered into a senior secured credit facility (the "Senior Secured Credit Facility"), consisting of a $1.0 billion senior secured revolving credit facility (the "Revolving Credit Facility") and a $7.6 billion senior secured term loan facility (the "Term Loans"). Our Revolving Credit Facility, which matures on October 25, 2018, allows for up to $150 million to be drawn in the form of letters of credit. As of December 31, 2015, we had $45 million of letters of credit outstanding and $955 million of available borrowings under the Revolving Credit Facility. We are currently required to pay a commitment fee of 0.125 percent per annum under the Revolving Credit Facility in respect of the unused commitments thereunder.

The Term Loans, which mature on October 25, 2020, were issued with an original issue discount of 0.50 percent. The Term Loans bear interest at variable rates, at our option, which is payable monthly or quarterly depending upon the variable rate that is chosen.

The obligations of the Senior Secured Credit Facility are unconditionally and irrevocably guaranteed by us and all of our direct or indirect wholly owned domestic subsidiaries, excluding our subsidiaries that are prohibited from providing guarantees as a result of the agreements governing our Timeshare Facility and/or our Securitized Timeshare Debt and our subsidiaries that secure other debt instruments. Additionally, none of our foreign subsidiaries or our non-wholly owned domestic subsidiaries guarantee the Senior Secured Credit Facility. We are required to meet certain covenant and coverage ratios under the terms of our Senior Secured Credit Facility, and we were in compliance with such requirements as of December 31, 2015.

During the year ended December 31, 2015, we made prepayments of $775 million on our Term Loans, including a contractually required prepayment using the net proceeds from the sale of the Hilton Sydney. See Note 4: "Disposals" for further information on the transaction.

Senior Notes

In 2013, we issued $1.5 billion of 5.625% senior notes due in 2021 (the "Senior Notes"). Interest on the Senior Notes is payable semi-annually in cash in arrears on April 15 and October 15 of each year. The Senior Notes are guaranteed on a senior unsecured basis by the same subsidiaries as the Senior Secured Credit Facility. See Note 27: "Condensed Consolidating Guarantor Financial Information" for additional details.

CMBS Loan

In 2013, we entered into a $3.5 billion commercial mortgage-backed securities loan secured by 23 of our U.S. owned real estate assets (the "CMBS Loan"). The CMBS Loan has a fixed-rate component in the amount of $2.625 billion bearing interest at 4.47 percent with a term of five years and an initial $875 million variable-rate component based on one-month LIBOR plus 265 basis points that has an initial term of two years with three one-year extensions solely at our option, for which the rate would increase by 25 basis points during the final extension period. We exercised our first one-year extension on November 1, 2015. Interest for both components is payable monthly. Under this loan, we are required to deposit with the lender certain cash reserves for restricted uses. As of December 31, 2015 and 2014, our consolidated balance sheets included $24 million and $19 million, respectively, of restricted cash and cash equivalents related to the CMBS Loan.

During the years ended December 31, 2015 and 2014, we made contractually required prepayments of $69 million and $13 million, respectively, on the variable-rate component of the CMBS Loan in exchange for the release of certain collateral.

Mortgage Loans

The $525 million Waldorf Astoria Loan was paid in full concurrent with the sale of the Waldorf Astoria New York. See Note 4: "Disposals" for further information on the transaction.

In February 2015, we assumed a $450 million mortgage loan secured by the Bonnet Creek Resort (the "Bonnet Creek Loan") as a result of an acquisition. See Note 3: "Acquisitions" for further information on the transaction. Principal payments, commencing in April 2016, are payable monthly over a 25-year amortization period with the unamortized portion due in full upon maturity. The Bonnet Creek Loan, maturing on April 29, 2018, with an option to extend for one year, bears interest at a variable rate based on one-month LIBOR plus 350 basis points, which is payable monthly. Under this loan, we are required to deposit with the lenders certain cash reserves for restricted uses. As of December 31, 2015, our consolidated balance sheet included $25 million of restricted cash and cash equivalents related to the Bonnet Creek Loan.

As of December 31, 2015 and 2014, we held other mortgage loans of $134 million and $196 million secured by two and seven, respectively, of our properties. In December 2015, we paid in full the $64 million mortgage loan assumed as part of an equity investments exchange in 2014. See Note 3: "Acquisitions" for further information on the initial transaction.

Non-recourse Debt

Non-recourse debt, including obligations for capital leases, and associated interest rates as of December 31, 2015 were as follows:

	December 31,
	2015				2014
	(in millions)
Capital lease obligations of consolidated VIEs with a rate of 6.34%, due 2018 to 2026	$	188			$	216
Non-recourse debt of consolidated VIEs with an average rate of 2.97%, due 2017 to 2020(1)	32				32
Timeshare Facility with a rate of 1.27%, due 2017	150				150
Securitized Timeshare Debt with an average rate of 1.97%, due 2026	356				481
	726				879
Less: current maturities of non-recourse debt	(117		)		(127		)
	$	609			$	752

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(1)	Excludes the non-recourse debt of our VIEs that issued the Securitized Timeshare Debt, as it is presented separately.

Timeshare Facility and Securitized Timeshare Debt

In 2013, we entered into a receivables loan agreement that is secured by certain of our timeshare financing receivables. Under the terms of the loan agreement we are permitted to borrow up to a maximum amount of approximately $300 million until December 2016, after which all amounts borrowed must be paid by December 2017. The Timeshare Facility bears interest at a variable rate based on one-month LIBOR plus 100 basis points, which is payable monthly.

In 2014, we issued approximately $304 million of 1.77 percent notes and $46 million of 2.07 percent notes due November 2026. In 2013, we issued approximately $250 million of 2.28 percent notes due January 2026. The Securitized Timeshare Debt is backed by a pledge of assets, consisting primarily of a pool of timeshare financing receivables secured by first mortgages or deeds of trust on timeshare interests. The Securitized Timeshare Debt is a non-recourse obligation and is payable solely from the pool of timeshare financing receivables pledged as collateral to the debt and related assets. A majority of the proceeds from the asset-backed notes were used to reduce the outstanding balance on our Timeshare Facility.

We are required to deposit payments received from customers on the timeshare financing receivables securing the Timeshare Facility and Securitized Timeshare Debt into depository accounts maintained by third parties. On a monthly basis, the depository accounts are utilized to make required principal, interest and other payments due under the respective loan agreements. The balances in the depository accounts, totaling $17 million and $25 million as of December 31, 2015 and 2014, respectively, were included in restricted cash and cash equivalents in our consolidated balance sheets.

Debt Maturities

The contractual maturities of our long-term debt and non-recourse debt as of December 31, 2015 were as follows:

Year	(in millions)
2016	$	227
2017	285
2018(1)	3,493
2019(1)	481
2020	4,282
Thereafter(1)	1,796
	$	10,564

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(1)	We assumed all extensions that are solely at our option for purposes of calculating maturity dates.

Note 13: Deferred Revenues

Deferred revenues were as follows:

	December 31,
	2015				2014
	(in millions)
Hilton HHonors points sales(1)	$	233			$	429
Other	50				66
	$	283			$	495

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(1)	In 2013, we sold Hilton HHonors points to issuers of Hilton HHonors co-branded credit cards and recorded deferred revenue upon receipt of the cash. The deferred revenue balance is reduced, and revenue is recognized, as the issuers use the points for promotions, rewards and incentive programs and certain other activities.

Note 14: Other Liabilities

Other long-term liabilities were as follows:

	December 31,
	2015				2014
	(in millions)
Program surplus	$	420			$	383
Pension obligations	183				204
Other long-term tax liabilities	295				273
Deferred employee compensation and benefits	173				103
Self-insurance reserves	87				83
Guarantee liability	25				37
Other	99				85
	$	1,282			$	1,168

Program surplus represents obligations to operate our marketing, sales and brand programs on behalf of our hotel owners. Guarantee liability is related to obligations under our outstanding performance guarantees. Our obligations related to the self-insurance claims are expected to be satisfied, on average, over the next three years.

Note 15: Derivative Instruments and Hedging Activities

During the years ended December 31, 2015, 2014 and 2013, derivatives were used to hedge the interest rate risk associated with variable-rate debt as required by certain loan agreements.

During the years ended December 31, 2015 and 2014, derivatives were also used to hedge foreign exchange risk associated with certain foreign currency denominated cash balances.

Cash Flow Hedges

As of December 31, 2015, we held four interest rate swaps with an aggregate notional amount of $1.45 billion, which swap three-month LIBOR on the Term Loans to a fixed rate of 1.87 percent and expire in October 2018. We elected to designate these interest rate swaps as cash flow hedges for accounting purposes.

Non-designated Hedges

As of December 31, 2015, we also held one interest rate cap in the notional amount of $862 million, for the variable-rate component of the CMBS Loan, that expires in November 2016 and caps one-month LIBOR at 6.9 percent, and one interest rate cap in the notional amount of $338 million that expires in May 2016 and caps one-month LIBOR at 3.0 percent on the Bonnet Creek Loan. We did not elect to designate any of these interest rate caps as hedging instruments.

As of December 31, 2015, we held 35 short-term foreign exchange forward contracts with an aggregate notional amount of $144 million to offset exposure to fluctuations in our foreign currency denominated cash balances. We elected not to designate these foreign exchange forward contracts as hedging instruments.

Fair Value of Derivative Instruments

The effects of our derivative instruments on our consolidated balance sheets were as follows:

			Fair Value
	Balance Sheet Classification		2015				2014
			(in millions)
Cash Flow Hedges
Interest rate swaps	Other liabilities		$	15			$	4
Non-designated Hedges
Interest rate caps(1)	Other assets		—				—
Forward contracts(2)	Other assets		1				—
Forward contracts(2)	Accounts payable, accrued expenses and other		1				—

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(1)	The fair values of our interest rate caps were less than $1 million as of December 31, 2015 and 2014.

(2)	The fair values of our forward contracts were less than $1 million as of December 31, 2014.

Earnings Effect of Derivative Instruments

The effects of our derivative instruments on our consolidated statements of operations and consolidated statements of comprehensive income (loss) before any effect for income taxes were as follows:

			Amount of Gain (Loss) Recognized in Income
	Classification of Gain (Loss) Recognized		2015				2014				2013
			(in millions)
Cash Flow Hedges
Interest rate swaps(1)	Other comprehensive income (loss)		$	(11	)		$	(14	)		$	10
Non-designated Hedges
Forward contracts	Gain (loss) on foreign currency transactions		11				1				N/A

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(1)	There were no amounts recognized in earnings related to hedge ineffectiveness or amounts excluded from hedge effectiveness testing during the years ended December 31, 2015, 2014, and 2013.

Note 16: Fair Value Measurements

The carrying amounts and estimated fair values of our financial assets and liabilities, which included related current portions, were as follows:

	December 31, 2015
					Hierarchy Level
	Carrying Amount				Level 1				Level 2				Level 3
	(in millions)
Assets:
Cash equivalents	$	327			$	—			$	327			$	—
Restricted cash equivalents	18				—				18				—
Timeshare financing receivables	1,082				—				—				1,080
Liabilities:
Long-term debt(1)	9,781				1,619				—				8,267
Non-recourse debt(2)	506				—				—				506
Interest rate swaps	15				—				15				—

	December 31, 2014
					Hierarchy Level
	Carrying Amount				Level 1				Level 2				Level 3
	(in millions)
Assets:
Cash equivalents	$	326			$	—			$	326			$	—
Restricted cash equivalents	38				—				38				—
Timeshare financing receivables	1,024				—				—				1,021
Liabilities:
Long-term debt(1)	10,741				1,630				—				9,207
Non-recourse debt(2)	631				—				—				626
Interest rate swaps	4				—				4				—

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(1)	Excludes capital lease obligations with a carrying value of $57 million and $72 million as of December 31, 2015 and 2014, respectively.

(2)	Excludes capital lease obligations of consolidated VIEs with a carrying value of $188 million and $216 million as of December 31, 2015 and 2014, respectively and non-recourse debt of consolidated VIEs with a carrying value of $32 million as of December 31, 2015 and 2014.

We believe the carrying amounts of our other financial assets and liabilities approximated fair value as of December 31, 2015 and 2014. Our estimates of the fair values were determined using available market information and appropriate valuation methods. Considerable judgment is necessary to interpret market data and develop the estimated fair values.

Cash equivalents and restricted cash equivalents primarily consisted of short-term interest-bearing money market funds with maturities of less than 90 days, time deposits and commercial paper. The estimated fair values were based on available market pricing information of similar financial instruments.

The estimated fair values of our timeshare financing receivables were based on the expected future cash flows discounted at weighted-average interest rates of the current portfolio, which reflect the risk of the underlying notes, primarily determined by the credit worthiness of the borrowers.

The estimated fair values of our Level 1 long-term debt were based on prices in active debt markets. The estimated fair values of our Level 3 long-term debt were based on indicative quotes received for similar issuances, the expected future cash flows discounted at risk-adjusted rates or the carrying value as the interest rates under the loan agreements approximated current market rates.

The estimated fair values of our Level 3 non-recourse debt approximated carrying values as the interest rates under the loan agreements either approximated current market rates or there were not significant fluctuations in current market rates to change the fair values of the underlying instruments.

We measure our interest rate swaps at fair value, which were estimated using an income approach. The primary inputs into our fair value estimate include interest rates and yield curves based on observable market inputs of similar instruments.

As a result of our acquisition of certain properties, we measured financial and nonfinancial assets and liabilities at fair value on a nonrecurring basis (see Note 3: "Acquisitions") as follows:

	2015				2014
	(in millions)
Property and equipment	$	1,868			$	144
Long-term debt	450				64

We estimated the fair values of these financial and nonfinancial assets and liabilities using discounted cash flow analyses with the following significant unobservable inputs (Level 3):

	2015		2014
Property and equipment:
Estimated stabilized growth rate	3 - 4 percent		2 - 3 percent
Term	10 - 11 years		11 - 13 years
Terminal capitalization rate(1)	7 - 8 percent		10 - 11 percent
Discount rate(1)	9 - 10 percent		9 - 11 percent
Long-term debt:
Risk adjusted rate	One-month LIBOR plus 275 basis points		N/A(2)

---

(1)	Reflects the risk profile of the individual markets where the assets are located and are not necessarily indicative of our hotel portfolio as a whole.

(2)	The fair value of the long-term debt approximated the carrying value as the interest rate under the loan agreement approximated current market rates.

Note 17: Leases

We lease hotel properties, land, equipment and corporate office space under operating and capital leases. As of December 31, 2015 and 2014, we leased 69 and 70 hotels, respectively, under operating leases, and five and six hotels, respectively, under capital leases. As of December 31, 2015 and 2014, two of these capital leases were liabilities of VIEs that we consolidated and were non-recourse to us. Our leases expire at various dates from 2016 through 2196, with varying renewal options, and the majority expire before 2026.

Our operating leases may require minimum rent payments, contingent rent payments based on a percentage of revenue or income or rent payments equal to the greater of a minimum rent or contingent rent. In addition, we may be required to pay some, or all, of the capital costs for property and equipment in the hotel during the term of the lease.

Amortization of assets recorded under capital leases is recorded in depreciation and amortization in our consolidated statements of operations and is recognized over the lease term.

The future minimum rent payments under non-cancelable leases, due in each of the next five years and thereafter as of December 31, 2015, were as follows:

	Operating Leases				Capital Leases				Non-Recourse Capital Leases
Year	(in millions)
2016	$	247			$	6			$	14
2017	229				6				14
2018	208				6				23
2019	195				6				23
2020	179				6				23
Thereafter	1,442				126				191
Total minimum rent payments	$	2,500			156				288
Less: amount representing interest					(99		)		(100		)
Present value of net minimum rent payments					$	57			$	188

Rent expense for all operating leases was as follows:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Minimum rentals	$	290			$	293			$	271
Contingent rentals	126				146				148
	$	416			$	439			$	419

Note 18: Income Taxes

Our tax provision includes federal, state and foreign income taxes payable. The domestic and foreign components of income before income taxes were as follows:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
U.S. income before tax	$	1,178			$	937			$	502
Foreign income before tax	318				210				196
Income before income taxes	$	1,496			$	1,147			$	698

The components of our provision (benefit) for income taxes were as follows:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Current:
Federal	$	446			$	323			$	94
State	45				28				15
Foreign	68				100				64
Total current	559				451				173
Deferred:
Federal	(527		)		8				160
State	(23		)		10				4
Foreign	71				(4		)		(99		)
Total deferred	(479		)		14				65
Total provision for income taxes	$	80			$	465			$	238

Reconciliations of our tax provision at the U.S. statutory rate to the provision (benefit) for income taxes were as follows:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Statutory U.S. federal income tax provision	$	524			$	402			$	244
State income taxes, net of U.S. federal tax benefit	53				35				31
Foreign income tax expense	119				56				74
Foreign losses not subject to U.S. tax	—				(7		)		(24		)
Nontaxable liquidation of subsidiaries	(640		)		—				—
U.S. benefit of foreign taxes	(118		)		(55		)		(55		)
Change in deferred tax asset valuation allowance	15				14				(121		)
Change in basis difference in foreign subsidiaries	8				10				24
Provision for uncertain tax positions	18				5				(19		)
Non-deductible share-based compensation	23				11				94
Non-deductible goodwill	77				—				—
Other, net	1				(6		)		(10		)
Provision for income taxes	$	80			$	465			$	238

During the year ended December 31, 2015, certain of our U.S. subsidiary corporations were converted to limited liability companies and certain of our subsidiary controlled foreign corporations elected to be disregarded for U.S. Federal income tax purposes. These transactions were treated as tax-free liquidations for federal tax purposes. As a result of these liquidation transactions, $512 million of deferred tax liabilities were derecognized. In addition, we recognized $128 million of previously unrecognized deferred tax assets associated with assets and liabilities distributed from the liquidated controlled foreign corporations, resulting in a total deferred tax benefit of $640 million. These previously unrecognized deferred tax assets were a component of our investment in foreign subsidiaries deferred tax balances that were connected to the liquidated controlled foreign corporations. Prior to these liquidations, we did not believe that the benefit of these deferred tax assets would be realized within the foreseeable future; therefore, we did not recognize these deferred tax assets.

During 2013, based on our consideration of all available positive and negative evidence, we determined that it was more likely than not we would be able to realize the benefit of various foreign deferred tax assets and state net operating losses. Accordingly, as of December 31, 2013, we released valuation allowances of $109 million and $12 million, respectively, against our deferred tax assets related to our foreign deferred tax assets and state net operating losses.

Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities plus carryforward items. The tax effects of the temporary differences and carryforwards that give rise to our net deferred tax asset (liability) were as follows:

	December 31,
	2015				2014
	(in millions)
Deferred tax assets:
Net operating loss carryforwards	$	456			$	525
Compensation	254				227
Investments	—				34
Other reserves	88				93
Capital lease obligations	100				115
Self-insurance reserves	51				54
Program surplus	79				70
Other	108				41
Total gross deferred tax assets	1,136				1,159
Less: valuation allowance	(491		)		(498		)
Deferred tax assets	$	645			$	661
Deferred tax liabilities:
Property and equipment	$	(2,198	)		$	(2,195	)
Brands	(1,889		)		(1,895		)
Amortizable intangible assets	(520		)		(526		)
Unrealized foreign currency gains	—				(407		)
Investments	(11		)		—
Investment in foreign subsidiaries	(35		)		(81		)
Deferred income	(544		)		(598		)
Deferred tax liabilities	(5,197		)		(5,702		)
Net deferred taxes	$	(4,552	)		$	(5,041	)

As of December 31, 2015, we had state and foreign net operating loss carryforwards of $288 million and $1.6 billion, respectively, which resulted in deferred tax assets of $15 million for state jurisdictions and $441 million for foreign jurisdictions. Approximately $29 million of our deferred tax assets as of December 31, 2015 related to net operating loss carryforwards that will expire between 2016 and 2035 with less than $1 million of that amount expiring in 2016. Approximately $427 million of our deferred tax assets as of December 31, 2015 resulted from net operating loss carryforwards that are not subject to expiration. We believe that it is more likely than not that the benefit from certain state and foreign net operating loss carryforwards will not be realized. In recognition of this assessment, we provided a valuation allowance of $430 million as of December 31, 2015 on the deferred tax assets relating to these state and foreign net operating loss carryforwards. Our valuation allowance decreased $7 million during the year ended December 31, 2015.

We classify reserves for tax uncertainties within current income taxes payable and other long-term liabilities in our consolidated balance sheets. Reconciliations of the beginning and ending amount of unrecognized tax benefits were as follows:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Balance at beginning of year	$	401			$	435			$	469
Additions for tax positions related to the prior year	12				25				1
Additions for tax positions related to the current year	8				10				5
Reductions for tax positions for prior years	(4		)		(63		)		(2		)
Settlements	(4		)		(1		)		(35		)
Lapse of statute of limitations	(2		)		(2		)		(2		)
Currency translation adjustment	(4		)		(3		)		(1		)
Balance at end of year	$	407			$	401			$	435

The changes to our unrecognized tax benefits during the years ended December 31, 2015 and 2014 were primarily the result of items identified, resolved and settled as part of our ongoing U.S. federal audit. We recognize interest and penalties

accrued related to uncertain tax positions in income tax expense. As of December 31, 2015 and 2014, we had accrued approximately $27 million and $22 million, respectively, for the payment of interest and penalties. We accrued approximately $5 million, $8 million and $4 million during the years ended December 31, 2015, 2014 and 2013, respectively. Included in the balance of uncertain tax positions as of December 31, 2015 and 2014 were $377 million and $367 million, respectively, associated with positions that if favorably resolved would provide a benefit to our effective tax rate. As a result of the expected resolution of examination issues with federal, state, and foreign tax authorities, we believe it is reasonably possible that during the next 12 months the amount of unrecognized tax benefits will decrease up to $220 million.

We file income tax returns, including returns for our subsidiaries, with federal, state and foreign jurisdictions. We are under regular and recurring audit by the Internal Revenue Service ("IRS") on open tax positions. The timing of the resolution of tax audits is highly uncertain, as are the amounts, if any, that may ultimately be paid upon such resolution. Changes may result from the conclusion of ongoing audits, appeals or litigation in state, local, federal and foreign tax jurisdictions or from the resolution of various proceedings between the U.S. and foreign tax authorities. We are no longer subject to U.S. federal income tax examination for years through 2004. As of December 31, 2015, we remain subject to federal examinations from 2005-2014, state examinations from 2003-2014 and foreign examinations of our income tax returns for the years 1996 through 2014.

In April 2014, we received 30-day Letters from the IRS and the Revenue Agents Report ("RAR") for the 2006 and October 2007 tax years. We disagreed with several of the proposed adjustments in the RAR, filed a formal appeals protest with the IRS and did not make any tax payments related to this audit. The issues being protested in appeals relate to assertions by the IRS that: (1) certain foreign currency-denominated, intercompany loans from our foreign subsidiaries to certain U.S. subsidiaries should be recharacterized as equity for U.S. federal income tax purposes and constitute deemed dividends from such foreign subsidiaries to our U.S. subsidiaries; (2) in calculating the amount of U.S. taxable income resulting from our Hilton HHonors guest loyalty program, we should not reduce gross income by the estimated costs of future redemptions, but rather such costs would be deductible at the time the points are redeemed; and (3) certain foreign-currency denominated loans issued by one of our Luxembourg subsidiaries whose functional currency is USD, should instead be treated as issued by one of our Belgian subsidiaries whose functional currency is the euro, and thus foreign currency gains and losses with respect to such loans should have been measured in euros, instead of USD. Additionally, during 2014, the IRS commenced its audit of tax years December 2007 through 2010. During 2015, we received Notices of Proposed Adjustments for tax years December 2007 through 2010 which reflect the carryover effect of the three protested issues from 2006 through October 2007. We intend to protest these proposed adjustments in appeals. In total, the proposed adjustments sought by the IRS would result in additional U.S. federal tax owed of approximately $874 million, excluding interest and penalties and potential state income taxes. The portion of this amount related to our Hilton HHonors guest loyalty program would result in a decrease to our future tax liability when the points are redeemed. We disagree with the IRS's position on each of these assertions and intend to vigorously contest them. We plan to pursue all available administrative remedies, and if we are not able to resolve these matters administratively, we plan to pursue judicial remedies. Accordingly, as of December 31, 2015, no accrual has been made for these amounts.

State income tax returns are generally subject to examination for a period of three to five years after filing the respective return; however, the state effect of any federal tax return changes remains subject to examination by various states for a period generally of up to one year after formal notification to the states. The statute of limitations for the foreign jurisdictions generally ranges from three to ten years after filing the respective tax return.

Note 19: Employee Benefit Plans

We sponsor multiple domestic and international employee benefit plans. Benefits are based upon years of service and compensation.

We have a noncontributory retirement plan in the U.S. (the "Domestic Plan"), which covers certain employees not earning union benefits. This plan was frozen for participant benefit accruals in 1996; therefore, the projected benefit obligation is equal to the accumulated benefit obligation. Plan assets will be used to pay benefits due to employees for service through December 31, 1996. As employees have not accrued additional benefits since that time, we do not utilize salary or pension inflation assumptions in calculating our benefit obligation for the Domestic Plan. The annual measurement date for the Domestic Plan is December 31.

We also have multiple employee benefit plans that cover many of our international employees. These include a plan that covers workers in the United Kingdom (the "U.K. Plan") which was frozen to further service accruals on November 30, 2013, and a number of smaller plans that cover workers in various countries around the world (the "International Plans"). The annual measurement date for all of these plans is December 31.

We are required to recognize the funded status (the difference between the fair value of plan assets and the projected benefit obligations) of our pension plans in our consolidated balance sheets with a corresponding adjustment to accumulated other comprehensive loss, net of tax.

The following table presents the projected benefit obligation, fair value of plan assets, the funded status and the accumulated benefit obligation for the Domestic Plan, the U.K. Plan and the International Plans:

	Domestic Plan								U.K. Plan								International Plans
	2015				2014				2015				2014				2015				2014
	(in millions)
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year	$	425			$	424			$	415			$	380			$	115			$	112
Service cost	—				—				1				1				2				2
Interest cost	16				17				15				17				2				4
Employee contributions	—				—				—				—				—				—
Actuarial loss (gain)	(8		)		51				(5		)		55				(1		)		13
Settlements and curtailments	(14		)		(25		)		—				—				(4		)		(1		)
Effect of foreign exchange rates	—				—				(19		)		(25		)		(4		)		(8		)
Benefits paid	(25		)		(42		)		(16		)		(13		)		(28		)		(7		)
Other	—				—				—				—				—				—
Benefit obligation at end of year	$	394			$	425			$	391			$	415			$	82			$	115
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	283			$	320			$	390			$	385			$	85			$	87
Actual return on plan assets, net of expenses	(11		)		20				(1		)		41				—				5
Employer contribution	32				10				13				1				8				6
Employee contributions	—				—				—				—				—				—
Effect of foreign exchange rates	—				—				(18		)		(24		)		(1		)		(5		)
Benefits paid	(25		)		(42		)		(16		)		(13		)		(28		)		(7		)
Settlements	(14		)		(25		)		—				—				(4		)		(1		)
Other	—				—				—				—				—				—
Fair value of plan assets at end of year	265				283				368				390				60				85
Funded status at end of year (overfunded/ (underfunded))	(129		)		(142		)		(23		)		(25		)		(22		)		(30		)
Accumulated benefit obligation	$	394			$	425			$	391			$	415			$	82			$	115

Amounts recognized in the consolidated balance sheets consisted of:

	Domestic Plan								U.K. Plan								International Plans
	2015				2014				2015				2014				2015				2014
	(in millions)
Other assets	$	2			$	1			$	—			$	—			$	7			$	6
Accounts payable, accrued expenses and other	—				—				—				—				—				—
Other liabilities	(131		)		(143		)		(23		)		(25		)		(29		)		(36		)
Net amount recognized	$	(129	)		$	(142	)		$	(23	)		$	(25	)		$	(22	)		$	(30	)

Amounts recognized in accumulated other comprehensive loss consisted of:

	Domestic Plan												U.K. Plan												International Plans
	2015				2014				2013				2015				2014				2013				2015				2014				2013
	(in millions)
Net actuarial loss (gain)	$	15			$	42			$	(67	)		$	16			$	33			$	—			$	1			$	10			$	(12	)
Prior service cost (credit)	(4		)		(4		)		(12		)		—				—				3				—				—				—
Amortization of net gain	(3		)		(7		)		(3		)		(2		)		(1		)		(4		)		(9		)		(1		)		(2		)
Net amount recognized	$	8			$	31			$	(82	)		$	14			$	32			$	(1	)		$	(8	)		$	9			$	(14	)

The estimated unrecognized net losses and prior service cost that will be amortized into net periodic pension cost over the next fiscal year were as follows:

	Domestic Plan												U.K. Plan												International Plans
	2015				2014				2013				2015				2014				2013				2015				2014				2013
	(in millions)
Unrecognized net losses	$	2			$	3			$	1			$	2			$	2			$	1			$	—			$	1			$	1
Unrecognized prior service cost	4				4				4				—				—				—				—				—				—
Amount unrecognized	$	6			$	7			$	5			$	2			$	2			$	1			$	—			$	1			$	1

The net periodic pension cost (credit) was as follows:

	Domestic Plan												U.K. Plan												International Plans
	2015				2014				2013				2015				2014				2013				2015				2014				2013
	(in millions)
Service cost	$	7			$	7			$	4			$	2			$	1			$	5			$	3			$	2			$	4
Interest cost	16				17				17				15				17				17				2				4				4
Expected return on plan assets	(19		)		(18		)		(18		)		(25		)		(24		)		(23		)		(4		)		(4		)		(4		)
Amortization of prior service cost (credit)	4				4				4				—				—				(3		)		—				—				—
Amortization of net loss	3				1				3				2				1				4				—				1				1
Settlement losses	—				5				—				—				—				—				10				1				—
Net periodic pension cost (credit)	$	11			$	16			$	10			$	(6	)		$	(5	)		$	—			$	11			$	4			$	5

The weighted-average assumptions used to determine benefit obligations were as follows:

	Domestic Plan				U.K. Plan				International Plans
	2015		2014		2015		2014		2015		2014
Discount rate	4.3%		3.9%		3.9%		3.8%		3.5%		3.3%
Salary inflation	N/A		N/A		1.7%		1.6%		2.1%		2.2%
Pension inflation	N/A		N/A		2.8%		2.8%		1.6%		1.8%

The weighted-average assumptions used to determine net periodic pension cost (credit) were as follows:

	Domestic Plan						U.K. Plan						International Plans
	2015		2014		2013		2015		2014		2013		2015		2014		2013
Discount rate	3.9%		4.7%		3.9%		3.8%		4.7%		4.7%		3.3%		4.3%		3.8%
Expected return on plan assets	7.5%		7.5%		7.5%		6.5%		6.5%		6.5%		5.1%		6.0%		6.3%
Salary inflation	N/A		N/A		N/A		1.6%		1.9%		1.9%		2.2%		2.3%		2.2%
Pension inflation	N/A		N/A		N/A		2.8%		3.0%		2.8%		1.8%		1.9%		2.0%

The investment objectives for the various plans are preservation of capital, current income and long-term growth of capital. All plan assets are managed by outside investment managers and do not include investments in Company stock. Asset allocations are reviewed periodically.

Expected long-term returns on plan assets are determined using historical performance for debt and equity securities held by our plans, actual performance of plan assets and current and expected market conditions. Expected returns are formulated based on the target asset allocation. The target asset allocation for the Domestic Plan as a percentage of total plan assets as of December 31, 2015 and 2014 was 60 percent in funds that invest in equity securities and 40 percent in funds that invest in debt securities. The U.K. Plan and International Plans target asset allocation as a percentage of total plan assets, as of December 31, 2015 and 2014, was 65 percent in funds that invest in equity and debt securities and 35 percent in bond funds.

The following tables present the fair value hierarchy of total plan assets measured at fair value by asset category. The fair value of Level 2 assets were based on available market pricing information of similar financial instruments. There were no Level 3 assets as of December 31, 2015 and 2014.

	December 31, 2015
	Domestic Plan								U.K. Plan								International Plans
	Level 1				Level 2				Level 1				Level 2				Level 1				Level 2
	(in millions)
Cash and cash equivalents	$	—			$	—			$	—			$	—			$	10			$	—
Equity funds	64				—				—				—				4				7
Debt securities	2				71				—				—				—				—
Bond funds	—				—				—				—				—				7
Common collective trusts	—				128				—				368				—				32
Other	—				—				—				—				—				—
Total	$	66			$	199			$	—			$	368			$	14			$	46

	December 31, 2014
	Domestic Plan								U.K. Plan								International Plans
	Level 1				Level 2				Level 1				Level 2				Level 1				Level 2
	(in millions)
Cash and cash equivalents	$	—			$	—			$	—			$	—			$	9			$	—
Equity funds	65				—				—				—				5				9
Debt securities	8				86				—				—				—				—
Bond funds	—				—				—				—				—				15
Common collective trusts	—				124				—				390				—				46
Other	—				—				—				—				—				1
Total	$	73			$	210			$	—			$	390			$	14			$	71

We expect to contribute approximately $14 million, $6 million and $3 million to the Domestic Plan, the U.K. Plan and the International Plans, respectively, in 2016.

As of December 31, 2015, the benefits expected to be paid in the next five years and in the aggregate for the five years thereafter were as follows:

	Domestic Plan				U.K. Plan				International Plans
Year	(in millions)
2016	$	32			$	15			$	8
2017	28				16				4
2018	27				16				4
2019	26				16				4
2020	26				17				5
2021-2025	127				87				22
	$	266			$	167			$	47

Domestic Plan

As of January 1, 2007, the frozen Domestic Plan and plans maintained for certain domestic hotels currently or formerly managed by us were merged into a multiple employer plan. As of December 31, 2015, the multiple employer plan had combined assets of $287 million and a projected benefit obligation of $419 million.

Other Benefit Plans

We also have plans covering qualifying employees and non-officer directors (the "Supplemental Plans"). Benefits for the Supplemental Plans are based upon years of service and compensation. Since December 31, 1996, employees and non-officer directors have not accrued additional benefits under the Supplemental Plans. These plans are self-funded by us and, therefore, have no plan assets isolated to pay benefits due to employees. As of December 31, 2015 and 2014, these plans had benefit obligations of $17 million and $13 million, respectively, which were fully accrued in our consolidated balance sheets. Expense

incurred under the Supplemental Plans for the years ended December 31, 2015, 2014 and 2013 were less than $1 million in each period.

We have various employee defined contribution investment plans whereby we contribute matching percentages of employee contributions. The aggregate expense under these plans totaled $23 million, $23 million and $20 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Note 20: Share-Based Compensation

Stock Plan

We recorded share-based compensation expense for awards granted under the Stock Plan of $96 million and $90 million during the years ended December 31, 2015 and 2014, respectively, which includes amounts reimbursed by hotel owners. Compensation expense under the Stock Plan for the year ended December 31, 2013 was less than $1 million. The total tax benefit recognized related to this compensation expense was $37 million and $34 million for the years ended December 31, 2015 and 2014, respectively. As of December 31, 2015 and 2014, we accrued $7 million and $12 million, respectively, in accounts payable, accrued expenses and other in our consolidated balance sheets for certain awards settled in cash.

As of December 31, 2015 and 2014, unrecognized compensation costs for unvested awards was approximately $96 million and $98 million, respectively. As of December 31, 2015, we expect to recognize these unrecognized compensation costs over a weighted-average period of 1.7 years on a straight-line basis. There were 68,627,645 shares of common stock available for future issuance under the Stock Plan as of December 31, 2015.

Restricted Stock Units

The following table summarizes the activity of our RSUs during the year ended December 31, 2015:

	Number of Shares			Weighted Average Grant Date Fair Value per Share
Outstanding as of December 31, 2014	5,276,917			$	21.53
Granted	2,038,639			27.46
Vested	(3,180,165	)		21.53
Forfeited	(397,140	)		24.12
Outstanding as of December 31, 2015	3,738,251			24.48

Stock Options

The following table summarizes the activity of our options during the year ended December 31, 2015:

	Number of Shares			Weighted Average Exercise Price per Share
Outstanding as of December 31, 2014	986,128			$	21.53
Granted	928,585			27.46
Exercised	(17,508	)		21.53
Forfeited, canceled or expired	(46,708	)		22.30
Outstanding as of December 31, 2015	1,850,497			24.49
Exercisable as of December 31, 2015	299,615			21.53

The grant date fair value of each of these option grants was $8.39 and $7.58, in 2015 and 2014, respectively, which was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:

	Year Ended December 31,
	2015			2014
Expected volatility(1)	28.00	%		33.00	%
Dividend yield(2)	—	%		—	%
Risk-free rate(3)	1.67	%		1.85	%
Expected term (in years)(4)	6.0			6.0

---

(1)

Due to limited trading history for our common stock, we did not have sufficient information available on which to base a reasonable and supportable estimate of the expected volatility of our share price. As a result, we used an average historical volatility of our peer group over a time period consistent with our expected term assumption. Our peer group was determined based upon companies in our industry with similar business models and is consistent with those used to benchmark our executive compensation.

(2)	At the date of grant we had no plans to pay dividends during the expected term of these options.

(3)	Based on the yields of U.S. Department of Treasury instruments with similar expected lives.

(4)	Estimated using the average of the vesting periods and the contractual term of the options.

Performance Shares

The following table summarizes the activity of our performance shares during the year ended December 31, 2015:

	Relative Shareholder Return							EBITDA CAGR
	Number of Shares			Weighted Average Grant Date Fair Value per Share				Number of Shares			Weighted Average Grant Date Fair Value per Share
Outstanding as of December 31, 2014	520,762			$	23.56			520,762			$	21.53
Granted	613,570			32.98				613,570			27.46
Vested	—			—				—			—
Forfeited	(35,249	)		24.30				(35,249	)		22.00
Outstanding as of December 31, 2015	1,099,083			28.79				1,099,083			24.83

The grant date fair value of each of the performance shares based on relative shareholder return was determined using a Monte Carlo simulation valuation model with the following assumptions:

	Year Ended December 31,
	2015			2014
Expected volatility(1)	24.00	%		30.00	%
Dividend yield(2)	—	%		—	%
Risk-free rate(3)	1.04	%		0.70	%
Expected term (in years)(4)	2.8			2.8

---

(1)

Due to limited trading history for our common stock, we did not have sufficient information available on which to base a reasonable and supportable estimate of the expected volatility of our share price. As a result, we used an average historical volatility of our peer group over a time period consistent with our expected term assumption. Our peer group was determined based upon companies in our industry with similar business models and is consistent with those used to benchmark our executive compensation.

(2)	At the date of grant we had no plans to pay dividends during the expected term of these performance shares.

(3)	Based on the yields of U.S. Department of Treasury instruments with similar expected lives.

(4)	Midpoint of the 30-calendar day period preceding the end of the performance period.

For performance shares based on our EBITDA CAGR, we determined that the performance condition is probable of achievement and as of December 31, 2015, we recognized compensation expense based on the anticipated achievement percentage as follows:

	Achievement Percentage
Performance shares granted in 2014	150	%
Performance shares granted in 2015	150	%

Deferred Share Units

During the year ended December 31, 2015 we issued to certain eligible non-employee directors 18,538 DSUs with a weighted average grant date fair value of $28.32, which are fully vested and non-forfeitable on the grant date.

Promote Plan

Prior to December 11, 2013, certain members of our senior management team participated in an executive compensation plan ("the Promote Plan"). The Promote Plan provided for the grant of a Tier I liability award and a Tier II equity award. As the vesting of a portion of the Tier I liability awards and all of the Tier II equity awards were previously subject to the achievement of a performance condition in the form of a liquidity event that was not probable, no expense was recognized related to these awards prior to their modification on December 11, 2013.

On December 11, 2013, in connection with our IPO, the Tier I liability awards of $52 million that remained outstanding became fully vested and were paid within 30 days. Additionally, the Tier II equity awards that remained outstanding were exchanged for restricted shares of common stock of equivalent economic value that vested as follows: (i) 40 percent of each award vested on December 11, 2013, the pricing date of our IPO; (ii) 40 percent of each award vested on December 11, 2014, the first anniversary of the pricing date of our IPO, contingent upon continued employment through that date; and (iii) 20 percent of each award vested on May 14, 2015, the date that Blackstone and their affiliates ceased to own 50 percent or more of the shares of the Company, contingent upon continued employment through that date. We recorded incremental share-based compensation expense of $306 million during the year ended December 31, 2013 as a result of this modification.

The following table summarizes our common stock activity related to the Promote Plan during the year ended December 31, 2015:

	Number of Shares			Weighted Average Grant Date Fair Value per Share
Balance as of December 31, 2014	3,445,812			$	20.00
Granted	—			—
Vested	(3,417,045	)		20.11
Forfeited	(28,767	)		20.00
Balance as of December 31, 2015	—			—

Total cash payments under the Promote Plan during the years ended December 31, 2014 and 2013 were $4 million and $65 million, respectively.

We recorded total compensation expense under the Promote Plan of $66 million, $32 million and $313 million during the years ended December 31, 2015, 2014 and 2013, respectively.

Cash-based Long-term Incentive Plan

In February 2014, we terminated a cash-based, long-term incentive plan and reversed the associated accruals resulting in a reduction of compensation expense of approximately $25 million for the year ended December 31, 2014.

Note 21: Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share ("EPS"):

	December 31,
	2015				2014				2013
	(in millions, except per share amounts)
Basic EPS:
Numerator:
Net income attributable to Hilton stockholders	$	1,404			$	673			$	415
Denominator:
Weighted average shares outstanding	986				985				923
Basic EPS	$	1.42			$	0.68			$	0.45
Diluted EPS:
Numerator:
Net income attributable to Hilton stockholders	$	1,404			$	673			$	415
Denominator:
Weighted average shares outstanding	989				986				923
Diluted EPS	$	1.42			$	0.68			$	0.45

Approximately 1 million share-based awards were excluded from the computation of diluted EPS for the years ended December 31, 2015 and 2014 because their effect would have been anti-dilutive under the treasury stock method.

Note 22: Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of taxes, were as follows:

	Currency Translation Adjustment(1)				Pension Liability Adjustment				Cash Flow Hedge Adjustment				Total
	(in millions)
Balance as of December 31, 2012	$	(212	)		$	(194	)		$	—			$	(406	)
Other comprehensive income before reclassifications	67				54				6				127
Amounts reclassified from accumulated other comprehensive loss	9				6				—				15
Net current period other comprehensive income	76				60				6				142
Balance as of December 31, 2013	(136		)		(134		)		6				(264		)
Other comprehensive loss before reclassifications	(299		)		(49		)		(9		)		(357		)
Amounts reclassified from accumulated other comprehensive loss	(5		)		4				—				(1		)
Net current period other comprehensive loss	(304		)		(45		)		(9		)		(358		)
Equity contribution to consolidated variable interest entities	(6		)		—				—				(6		)
Balance as of December 31, 2014	(446		)		(179		)		(3		)		(628		)
Other comprehensive loss before reclassifications	(150		)		(21		)		(7		)		(178		)
Amounts reclassified from accumulated other comprehensive loss	16				6				—				22
Net current period other comprehensive loss	(134		)		(15		)		(7		)		(156		)
Balance as of December 31, 2015	$	(580	)		$	(194	)		$	(10	)		$	(784	)

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(1)	Includes net investment hedges and intra-entity foreign currency transactions that are of a long-term investment nature.

The following table presents additional information about reclassifications out of accumulated other comprehensive loss; amounts in parentheses indicate a loss in our consolidated statements of operations:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Currency translation adjustment:
Sale and liquidation of foreign assets(1)	$	(25	)		$	3			$	(15	)
Gains on net investment hedges (2)	—				2				1
Tax benefit(3)(4)	9				—				5
Total currency translation adjustment reclassifications for the period, net of taxes	(16		)		5				(9		)
Pension liability adjustment:
Amortization of prior service cost(5)	(4		)		(4		)		(1		)
Amortization of net loss(5)	(5		)		(3		)		(8		)
Tax benefit(3)	3				3				3
Total pension liability adjustment reclassifications for the period, net of taxes	(6		)		(4		)		(6		)
Total reclassifications for the period, net of tax	$	(22	)		$	1			$	(15	)

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(1)	Reclassified out of accumulated other comprehensive loss to gain on sales of assets, net for the year ended December 31, 2015 and other gain (loss), net for the years ended December 31, 2014 and 2013 in our consolidated statements of operations. See Note 4: "Disposals" for additional information.

(2)	Reclassified out of accumulated other comprehensive loss to gain (loss) on foreign currency transactions in our consolidated statement of operations.

(3)	Reclassified out of accumulated other comprehensive loss to income tax expense in our consolidated statements of operations.

(4)	The tax benefit was less than $1 million for the year ended December 31, 2014.

(5)	Reclassified out of accumulated other comprehensive loss to general, administrative and other in our consolidated statements of operations. These amounts were included in the computation of net periodic pension cost. See Note 19: "Employee Benefit Plans" for additional information.

Note 23: Business Segments

We are a diversified hospitality company with operations organized in three distinct operating segments: ownership, management and franchise and timeshare. Each segment is managed separately because of its distinct economic characteristics.

The ownership segment included 146 properties totaling 59,463 rooms, comprising 123 hotels that we wholly owned or leased, three consolidated non-wholly owned entities, three consolidated VIEs and unconsolidated investments in affiliates that owned or operated 17 properties, as of December 31, 2015. While we do not include equity in earnings (losses) from unconsolidated affiliates in our measures of segment revenues, we manage these investments in our ownership segment.

The management and franchise segment includes all of the hotels we manage for third-party owners, as well as all franchised hotels operated or managed by someone other than us under one of our proprietary brand names in our brand portfolio. As of December 31, 2015, this segment included 544 managed hotels and 3,875 franchised hotels totaling 4,419 hotels consisting of 691,887 rooms. This segment also earns fees for managing properties in our ownership and timeshare segment.

The timeshare segment includes the development of vacation ownership clubs and resorts, marketing and selling of timeshare intervals, providing timeshare customer financing and resort operations. This segment also provides assistance to third-party developers in selling their timeshare inventory. As of December 31, 2015, this segment included 45 timeshare properties totaling 7,152 units.

Corporate and other represents revenues and related operating expenses generated by the incidental support of hotel operations for owned, leased, managed and franchised hotels and other rental income, as well as corporate assets and related expenditures.

The performance of our operating segments is evaluated primarily based on Adjusted EBITDA. We define Adjusted EBITDA as EBITDA, further adjusted to exclude certain items, including, but not limited to, gains, losses and expenses in connection with: (i) asset dispositions for both consolidated and unconsolidated investments; (ii) foreign currency transactions; (iii) debt restructurings/retirements; (iv) non-cash impairment losses; (v) furniture, fixtures and equipment ("FF&E") replacement reserves required under certain lease agreements; (vi) reorganization costs; (vii) share-based and certain other compensation expenses; (viii) severance, relocation and other expenses; and (ix) other items. To align with management's view of allocating resources and assessing the performance of our segments and to facilitate comparisons with our competitors,

beginning in the first quarter of 2015, Adjusted EBITDA excluded all share-based compensation expense, not just share-based compensation expense recognized in connection with equity issued prior to and in connection with our IPO. We have applied this change in the definition to historical results presented to allow for comparability.

The following table presents revenues and Adjusted EBITDA for our reportable segments, reconciled to consolidated amounts:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Revenues:
Ownership(1)(2)	$	4,262			$	4,271			$	4,075
Management and franchise(3)	1,691				1,468				1,271
Timeshare	1,308				1,171				1,109
Segment revenues	7,261				6,910				6,455
Other revenues from managed and franchised properties	4,130				3,691				3,405
Other revenues(4)	91				99				69
Intersegment fees elimination(1)(2)(3)(4)	(210		)		(198		)		(194		)
Total revenues	$	11,272			$	10,502			$	9,735
Adjusted EBITDA:
Ownership(1)(2)(3)(4)(5)	$	1,064			$	1,000			$	926
Management and franchise(3)	1,691				1,468				1,271
Timeshare(1)(3)	352				337				297
Corporate and other(2)(4)	(228		)		(255		)		(284		)
Adjusted EBITDA	$	2,879			$	2,550			$	2,210

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(1)

Includes charges to timeshare operations for rental fees and fees for other amenities, which were eliminated in our consolidated financial statements. These charges totaled $25 million, $28 million and $26 million for the years ended December 31, 2015, 2014 and 2013, respectively. While the net effect is zero, our measures of segment revenues and Adjusted EBITDA include these fees as a benefit to the ownership segment and a cost to timeshare Adjusted EBITDA.

(2)	Includes various other intercompany charges of $4 million, $4 million and $3 million for the years ended December 31, 2015, 2014 and 2013, respectively.

(3)

Includes management, royalty and intellectual property fees of $131 million, $113 million and $100 million for the years ended December 31, 2015, 2014 and 2013, respectively. These fees are charged to consolidated owned and leased properties and were eliminated in our consolidated financial statements. Also includes a licensing fee of $43 million, $44 million and $56 million for the years ended December 31, 2015, 2014 and 2013, respectively, which is charged to our timeshare segment by our management and franchise segment and was eliminated in our consolidated financial statements. While the net effect is zero, our measures of segment revenues and Adjusted EBITDA include these fees as a benefit to the management and franchise segment and a cost to ownership Adjusted EBITDA and timeshare Adjusted EBITDA.

(4)	Includes charges to consolidated owned and leased properties for services provided by our wholly owned laundry business of $7 million, $9 million and $9 million for the years ended December 31, 2015, 2014 and 2013, respectively. These charges were eliminated in our consolidated financial statements.

(5)	Includes unconsolidated affiliate Adjusted EBITDA.

The table below provides a reconciliation of net income attributable to Hilton stockholders to EBITDA and Adjusted EBITDA:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Net income attributable to Hilton stockholders	$	1,404			$	673			$	415
Interest expense	575				618				620
Income tax expense	80				465				238
Depreciation and amortization	692				628				603
Interest expense, income tax and depreciation and amortization included in equity in earnings from unconsolidated affiliates	32				37				45
EBITDA	2,783				2,421				1,921
Net income attributable to noncontrolling interests	12				9				45
Gain on sales of assets, net	(306		)		—				—
Loss (gain) on foreign currency transactions	41				(26		)		45
FF&E replacement reserve	48				46				46
Share-based compensation expense	162				74				313
Impairment loss	9				—				—
Gain on debt extinguishment	—				—				(229		)
Other loss (gain), net	1				(37		)		(7		)
Other adjustment items(1)	129				63				76
Adjusted EBITDA	$	2,879			$	2,550			$	2,210

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(1)	Includes $95 million of severance costs related to the sale of the Waldorf Astoria New York for the year ended December 31, 2015.

The following table presents total assets for our reportable segments, reconciled to consolidated amounts:

	December 31,
	2015				2014
	(in millions)
Ownership	$	11,359			$	11,595
Management and franchise	10,392				10,530
Timeshare	1,939				1,840
Corporate and other	2,026				2,160
	$	25,716			$	26,125

The following table presents capital expenditures for property and equipment for our reportable segments, reconciled to consolidated amounts:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Ownership	$	277			$	245			$	240
Timeshare	17				14				8
Corporate and other	16				9				6
	$	310			$	268			$	254

Total revenues by country were as follows:

	Year Ended December 31,
	2015				2014				2013
	(in millions)
U.S.	$	8,844			$	7,927			$	7,262
All other	2,428				2,575				2,473
	$	11,272			$	10,502			$	9,735

Other than the U.S., there were no countries that individually represented more than 10 percent of total revenues for the years ended December 31, 2015, 2014 and 2013.

Property and equipment, net by country were as follows:

	December 31,
	2015				2014
	(in millions)
U.S.(1)	$	8,612			$	6,673
All other	507				810
	$	9,119			$	7,483

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(1)	Excludes property and equipment, net held for sale as of December 31, 2014, all of which was located in the U.S.

Other than the U.S. there were no countries that individually represented over 10 percent of total property and equipment, net as of December 31, 2015 and 2014.

Note 24: Commitments and Contingencies

As of December 31, 2015, we had outstanding guarantees of $25 million, with remaining terms ranging from four years to seven years, for debt and other obligations of third parties. We have one letter of credit for $25 million that has been pledged as collateral for one of these guarantees. Although we believe it is unlikely that material payments will be required under these guarantees or letter of credit, there can be no assurance that this will be the case.

We have also provided performance guarantees to certain owners of hotels that we operate under management contracts. Most of these guarantees allow us to terminate the contract, rather than fund shortfalls, if specified performance levels are not achieved. However, in limited cases, we are obligated to fund performance shortfalls. As of December 31, 2015, we had six contracts containing performance guarantees, with expirations ranging from 2019 to 2030, and possible cash outlays totaling approximately $83 million. Our obligations under these guarantees in future periods are dependent on the operating performance levels of these hotels over the remaining terms of the performance guarantees. As of December 31, 2015 and 2014, we recorded current liabilities of approximately $8 million and non-current liabilities of approximately $25 million and $37 million, respectively, in our consolidated balance sheets for obligations under our outstanding performance guarantees that are related to certain VIEs for which we are not the primary beneficiary.

As of December 31, 2015, we had outstanding commitments under third-party contracts of approximately $56 million for capital expenditures at certain owned and leased properties. Our contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.

We have entered into an agreement with an affiliate of the owner of a hotel whereby we have agreed to provide a $60 million junior mezzanine loan to finance the construction of a new hotel. The junior mezzanine loan is subordinated to a senior mortgage loan and senior mezzanine loan provided by third parties unaffiliated with us and is being funded on a pro rata basis with these loans as the construction costs are incurred. During the year ended December 31, 2015, we funded $17 million of this commitment, and we currently expect to fund the remainder of our commitment as follows: $39 million in 2016 and $4 million in 2017.

We have entered into certain arrangements with developers whereby we have committed to purchase timeshare units at a future date to be marketed and sold under our Hilton Grand Vacations brand. As of December 31, 2015, we are committed to purchase approximately $206 million of inventory over a period of four years. The ultimate amount and timing of the acquisitions is subject to change pursuant to the terms of the respective arrangements, which could also allow for cancellation in certain circumstances. During the years ended December 31, 2015, 2014 and 2013, we purchased $17 million, $29 million and $35 million, respectively, of timeshare inventory as required under our commitments. As of December 31, 2015, our remaining obligation pursuant to these arrangements was expected to be incurred as follows: $16 million in 2016, $8 million in 2017 and $182 million in 2019.

During 2010, an affiliate of Blackstone settled a $75 million liability on our behalf in conjunction with a lawsuit settlement by entering into service contracts with the plaintiff. We recorded the portion settled by this affiliate as a capital contribution. Additionally, as part of the settlement, we entered into a guarantee with the plaintiff to pay any shortfall that this affiliate does not fund related to those service contracts up to the value of the settlement amount made by the affiliate. The remaining potential exposure under this guarantee as of December 31, 2015 was approximately $22 million. We have not accrued a liability for this guarantee as we believe the likelihood of any material funding to be remote.

We are involved in other litigation arising from the normal course of business, some of which includes claims for substantial sums. While the ultimate results of claims and litigation cannot be predicted with certainty, we expect that the ultimate resolution of all pending or threatened claims and litigation as of December 31, 2015 will not have a material effect on our consolidated results of operations, financial position or cash flows.

Note 25: Related Party Transactions

Investment in Affiliates

We hold investments in affiliates that own or lease properties that we manage. See Note 8: "Investments in Affiliates" for additional information. The following tables summarize amounts included in our consolidated financial statements related to these management agreements:

	December 31,
	2015				2014
	(in millions)
Balance Sheets
Assets:
Accounts receivable, net	$	23			$	19
Management and franchise contracts, net	20				16
Liabilities:
Accounts payable, accrued expenses and other	10				10

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Statements of Operations
Revenues:
Management and franchise fees and other	$	24			$	25			$	31
Other revenues from managed and franchised properties	166				167				174
Expenses:
Other expenses from managed and franchised properties	166				167				174
Non-operating income and expenses:
Interest income	—				1				3
Statements of Cash Flows
Investing Activities:
Contract acquisition costs	4				—				—

The Blackstone Group

Blackstone directly and indirectly owns or controls hotels that we manage or franchise and for which we receive fees in connection with the management and franchise agreements. Our maximum exposure to loss related to these hotels is limited to the amounts discussed below; therefore, our involvement with these hotels does not expose us to additional variability or risk of loss. The following tables summarize amounts included in our consolidated financial statements related to these management and franchise agreements:

	December 31,
	2015				2014
	(in millions)
Balance Sheets
Assets:
Accounts receivable, net	$	21			$	52
Management and franchise contracts, net	16				38
Liabilities:
Accounts payable, accrued expenses and other	9				22

	Year Ended December 31,
	2015				2014				2013
	(in millions)
Statements of Operations
Revenues:
Management and franchise fees and other	$	48			$	60			$	42
Other revenues from managed and franchised properties	160				293				174
Expenses:
Other expenses from managed and franchised properties	160				293				174
Statements of Cash Flows
Investing Activities:
Contract acquisition costs	—				7				15

During the year ended December 31, 2015, we acquired, as part of a tax deferred exchange of real property, certain properties from sellers affiliated with Blackstone for a total purchase price of $1.76 billion. See Note 3: "Acquisitions" for additional details.

In 2014, we completed the sale of certain land and easement rights at one of our hotels to an affiliate of Blackstone in connection with a timeshare project. The total consideration received for this transaction was approximately $37 million. See Note 4: "Disposals" for additional details.

We also purchase products and services from entities affiliated with or owned by Blackstone. The fees paid for these products and services were $32 million, $31 million and $24 million during the years ended December 31, 2015, 2014 and 2013, respectively.

Note 26: Supplemental Disclosures of Cash Flow Information

Interest paid during the years ended December 31, 2015, 2014 and 2013, was $485 million, $514 million and $535 million, respectively.

Income taxes, net of refunds, paid during the years ended December 31, 2015, 2014 and 2013 were $475 million, $429 million and $233 million, respectively.

In connection with our IPO in 2013, we incurred net underwriting discounts and commissions of $27 million and other offering expenses of $12 million, which are included in net proceeds from issuance of common stock in our consolidated statement of cash flows.

The following non-cash investing and financing activities were excluded from the consolidated statements of cash flows:

•	In 2015, we assumed the $450 million Bonnet Creek Loan as a result of an acquisition.

•	In 2015, one of our consolidated VIEs modified the terms of its capital lease resulting in a reduction in non-recourse debt of $24 million. See Note 9: "Consolidated Variable Interest Entities" for further discussion.

•	In 2014, we transferred $45 million of property and equipment to timeshare inventory as part of a conversion of certain floors at one of our owned properties into timeshare units.

•	In 2014, we completed an equity investments exchange with a joint venture partner where we acquired $144 million of property and equipment, $1 million of other intangible assets and assumed $64 million of long-term debt. We also disposed of $59 million in equity method investments. See Note 3: "Acquisitions" for further discussion.

•	In 2014, we restructured a capital lease in conjunction with a rent arbitration ruling, for which we recorded an additional capital lease asset and obligation of $11 million.

•	In 2013, one of our consolidated VIEs restructured the terms of its capital lease resulting in a reduction in our capital lease asset and obligation of $44 million and $48 million, respectively.

Note 27: Condensed Consolidating Guarantor Financial Information

In October 2013, Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. (the "Subsidiary Issuers"), entities formed in August 2013 which are 100 percent owned by the Parent, issued the Senior Notes. The obligations of the Subsidiary Issuers are guaranteed jointly and severally on a senior unsecured basis by the Parent and certain of the Parent's 100 percent owned domestic restricted subsidiaries (the "Guarantors"). The indenture that governs the Senior Notes provides that any subsidiary of the Company that provides a guarantee of the Senior Secured Credit Facility will guarantee the Senior Notes. None of our foreign subsidiaries or U.S. subsidiaries owned by foreign subsidiaries or conducting foreign operations; our non-wholly owned subsidiaries; our subsidiaries that secure the CMBS Loan and $450 million in mortgage loans; or certain of our special purpose subsidiaries formed in connection with our Timeshare Facility and Securitized Timeshare Debt guarantee the Senior Notes (collectively, the "Non-Guarantors").

The guarantees are full and unconditional, subject to certain customary release provisions. The indenture that governs the Senior Notes provides that any Guarantor may be released from its guarantee so long as: (a) the subsidiary is sold or sells all of its assets; (b) the subsidiary is released from its guaranty under the Senior Secured Credit Facility; (c) the subsidiary is declared "unrestricted" for covenant purposes; or (d) the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied.

The following schedules present the condensed consolidating financial information as of December 31, 2015 and 2014, and for the years ended December 31, 2015, 2014 and 2013, for the Parent, Subsidiary Issuers, Guarantors and Non-Guarantors.

	December 31, 2015
Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	—			$	—			$	223			$	386			$	—			$	609
Restricted cash and cash equivalents	—				—				148				99				—				247
Accounts receivable, net	—				—				501				375				—				876
Intercompany receivables	—				—				89				—				(89		)		—
Inventories	—				—				419				23				—				442
Current portion of financing receivables, net	—				—				55				19				—				74
Current portion of securitized financing receivables, net	—				—				—				55				—				55
Prepaid expenses	—				—				39				129				(21		)		147
Income taxes receivable	—				—				120				—				(23		)		97
Other	—				—				9				29				—				38
Total current assets	—				—				1,603				1,115				(133		)		2,585
Property, Intangibles and Other Assets:
Property and equipment, net	—				—				304				8,815				—				9,119
Financing receivables, net	—				—				451				141				—				592
Securitized financing receivables, net	—				—				—				295				—				295
Investments in affiliates	—				—				94				44				—				138
Investments in subsidiaries	6,166				11,854				5,232				—				(23,252		)		—
Goodwill	—				—				3,851				2,036				—				5,887
Brands	—				—				4,405				514				—				4,919
Management and franchise contracts, net	—				—				877				272				—				1,149
Other intangible assets, net	—				—				402				184				—				586
Deferred income tax assets	24				3				—				78				(27		)		78
Other	—				70				165				133				—				368
Total property, intangibles and other assets	6,190				11,927				15,781				12,512				(23,279		)		23,131
TOTAL ASSETS	$	6,190			$	11,927			$	17,384			$	13,627			$	(23,412	)		$	25,716
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	—			$	39			$	1,542			$	646			$	(21	)		$	2,206
Intercompany payables	—				—				—				89				(89		)		—
Current maturities of long-term debt	—				—				—				111				—				111
Current maturities of non-recourse debt	—				—				—				117				—				117
Income taxes payable	—				—				6				50				(23		)		33
Total current liabilities	—				39				1,548				1,013				(133		)		2,467
Long-term debt	—				5,708				54				3,948				—				9,710
Non-recourse debt	—				—				—				609				—				609
Deferred revenues	—				—				282				1				—				283
Deferred income tax liabilities	—				—				2,041				2,616				(27		)		4,630
Liability for guest loyalty program	—				—				784				—				—				784
Other	205				14				821				242				—				1,282
Total liabilities	205				5,761				5,530				8,429				(160		)		19,765
Equity:
Total Hilton stockholders' equity	5,985				6,166				11,854				5,232				(23,252		)		5,985
Noncontrolling interests	—				—				—				(34		)		—				(34		)
Total equity	5,985				6,166				11,854				5,198				(23,252		)		5,951
TOTAL LIABILITIES AND EQUITY	$	6,190			$	11,927			$	17,384			$	13,627			$	(23,412	)		$	25,716

	December 31, 2014
Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	—			$	—			$	270			$	296			$	—			$	566
Restricted cash and cash equivalents	—				—				135				67				—				202
Accounts receivable, net	—				—				478				366				—				844
Intercompany receivables	—				—				46				—				(46		)		—
Inventories	—				—				380				24				—				404
Current portion of financing receivables, net	—				—				47				19				—				66
Current portion of securitized financing receivables, net	—				—				—				62				—				62
Prepaid expenses	—				—				29				124				(20		)		133
Income taxes receivable	—				—				154				—				(22		)		132
Other	—				—				15				75				—				90
Total current assets	—				—				1,554				1,033				(88		)		2,499
Property, Intangibles and Other Assets:
Property and equipment, net	—				—				305				7,178				—				7,483
Property and equipment, net held for sale	—				—				—				1,543				—				1,543
Financing receivables, net	—				—				272				144				—				416
Securitized financing receivables, net	—				—				—				406				—				406
Investments in affiliates	—				—				123				47				—				170
Investments in subsidiaries	4,924				11,361				4,935				—				(21,220		)		—
Goodwill	—				—				3,847				2,307				—				6,154
Brands	—				—				4,405				558				—				4,963
Management and franchise contracts, net	—				—				1,007				299				—				1,306
Other intangible assets, net	—				—				466				208				—				674
Deferred income tax assets	22				1				—				155				(23		)		155
Other	—				85				119				152				—				356
Total property, intangibles and other assets	4,946				11,447				15,479				12,997				(21,243		)		23,626
TOTAL ASSETS	$	4,946			$	11,447			$	17,033			$	14,030			$	(21,331	)		$	26,125
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	—			$	40			$	1,384			$	695			$	(20	)		$	2,099
Intercompany payables	—				—				—				46				(46		)		—
Current maturities of long-term debt	—				—				—				10				—				10
Current maturities of non-recourse debt	—				—				—				127				—				127
Income taxes payable	—				—				5				38				(22		)		21
Total current liabilities	—				40				1,389				916				(88		)		2,257
Long-term debt	—				6,479				54				4,270				—				10,803
Non-recourse debt	—				—				—				752				—				752
Deferred revenues	—				—				493				2				—				495
Deferred income tax liabilities	—				—				2,306				2,933				(23		)		5,216
Liability for guest loyalty program	—				—				720				—				—				720
Other	194				4				710				260				—				1,168
Total liabilities	194				6,523				5,672				9,133				(111		)		21,411
Equity:
Total Hilton stockholders' equity	4,752				4,924				11,361				4,935				(21,220		)		4,752
Noncontrolling interests	—				—				—				(38		)		—				(38		)
Total equity	4,752				4,924				11,361				4,897				(21,220		)		4,714
TOTAL LIABILITIES AND EQUITY	$	4,946			$	11,447			$	17,033			$	14,030			$	(21,331	)		$	26,125

	Year Ended December 31, 2015
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Revenues
Owned and leased hotels	$	—			$	—			$	231			$	4,030			$	(28	)		$	4,233
Management and franchise fees and other	—				—				1,362				337				(98		)		1,601
Timeshare	—				—				1,227				81				—				1,308
	—				—				2,820				4,448				(126		)		7,142
Other revenues from managed and franchised properties	—				—				4,608				481				(959		)		4,130
Total revenues	—				—				7,428				4,929				(1,085		)		11,272
Expenses
Owned and leased hotels	—				—				168				3,086				(86		)		3,168
Timeshare	—				—				906				16				(25		)		897
Depreciation and amortization	—				—				336				356				—				692
Impairment losses	—				—				—				9				—				9
General, administrative and other	—				—				494				132				(15		)		611
	—				—				1,904				3,599				(126		)		5,377
Other expenses from managed and franchised properties	—				—				4,608				481				(959		)		4,130
Total expenses	—				—				6,512				4,080				(1,085		)		9,507
Gain on sales of assets, net	—				—				—				306				—				306
Operating income	—				—				916				1,155				—				2,071
Interest income	—				—				16				3				—				19
Interest expense	—				(281		)		(52		)		(242		)		—				(575		)
Equity in earnings from unconsolidated affiliates	—				—				18				5				—				23
Gain (loss) on foreign currency transactions	—				—				77				(118		)		—				(41		)
Other gain (loss), net	—				—				(3		)		2				—				(1		)
Income (loss) before income taxes and equity in earnings from subsidiaries	—				(281		)		972				805				—				1,496
Income tax benefit (expense)	(7		)		108				4				(185		)		—				(80		)
Income (loss) before equity in earnings from subsidiaries	(7		)		(173		)		976				620				—				1,416
Equity in earnings from subsidiaries	1,411				1,584				608				—				(3,603		)		—
Net income	1,404				1,411				1,584				620				(3,603		)		1,416
Net income attributable to noncontrolling interests	—				—				—				(12		)		—				(12		)
Net income attributable to Hilton stockholders	$	1,404			$	1,411			$	1,584			$	608			$	(3,603	)		$	1,404
Comprehensive income	$	1,248			$	1,404			$	1,546			$	509			$	(3,447	)		$	1,260
Comprehensive income attributable to noncontrolling interests	—				—				—				(12		)		—				(12		)
Comprehensive income attributable to Hilton stockholders	$	1,248			$	1,404			$	1,546			$	497			$	(3,447	)		$	1,248

	Year Ended December 31, 2014
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Revenues
Owned and leased hotels	$	—			$	—			$	217			$	4,053			$	(31	)		$	4,239
Management and franchise fees and other	—				—				1,174				332				(105		)		1,401
Timeshare	—				—				1,075				96				—				1,171
	—				—				2,466				4,481				(136		)		6,811
Other revenues from managed and franchised properties	—				—				4,137				427				(873		)		3,691
Total revenues	—				—				6,603				4,908				(1,009		)		10,502
Expenses
Owned and leased hotels	—				—				161				3,164				(73		)		3,252
Timeshare	—				—				798				18				(49		)		767
Depreciation and amortization	—				—				307				321				—				628
General, administrative and other	—				—				379				126				(14		)		491
	—				—				1,645				3,629				(136		)		5,138
Other expenses from managed and franchised properties	—				—				4,137				427				(873		)		3,691
Total expenses	—				—				5,782				4,056				(1,009		)		8,829
Operating income	—				—				821				852				—				1,673
Interest income	—				—				7				3				—				10
Interest expense	—				(334		)		(58		)		(226		)		—				(618		)
Equity in earnings from unconsolidated affiliates	—				—				15				4				—				19
Gain (loss) on foreign currency transactions	—				—				441				(415		)		—				26
Other gain, net	—				—				6				31				—				37
Income (loss) before income taxes and equity in earnings from subsidiaries	—				(334		)		1,232				249				—				1,147
Income tax benefit (expense)	(5		)		128				(468		)		(120		)		—				(465		)
Income (loss) before equity in earnings from subsidiaries	(5		)		(206		)		764				129				—				682
Equity in earnings from subsidiaries	678				884				120				—				(1,682		)		—
Net income	673				678				884				129				(1,682		)		682
Net income attributable to noncontrolling interests	—				—				—				(9		)		—				(9		)
Net income attributable to Hilton stockholders	$	673			$	678			$	884			$	120			$	(1,682	)		$	673
Comprehensive income (loss)	$	315			$	669			$	813			$	(144	)		$	(1,324	)		$	329
Comprehensive income attributable to noncontrolling interests	—				—				—				(14		)		—				(14		)
Comprehensive income (loss) attributable to Hilton stockholders	$	315			$	669			$	813			$	(158	)		$	(1,324	)		$	315

	Year Ended December 31, 2013
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Revenues
Owned and leased hotels	$	—			$	—			$	190			$	3,882			$	(26	)		$	4,046
Management and franchise fees and other	—				—				986				312				(123		)		1,175
Timeshare	—				—				1,052				57				—				1,109
	—				—				2,228				4,251				(149		)		6,330
Other revenues from managed and franchised properties	—				—				3,874				351				(820		)		3,405
Total revenues	—				—				6,102				4,602				(969		)		9,735
Expenses
Owned and leased hotels	—				—				147				3,058				(58		)		3,147
Timeshare	—				—				797				12				(79		)		730
Depreciation and amortization	—				—				279				324				—				603
General, administrative and other	—				—				620				140				(12		)		748
	—				—				1,843				3,534				(149		)		5,228
Other expenses from managed and franchised properties	—				—				3,874				351				(820		)		3,405
Total expenses	—				—				5,717				3,885				(969		)		8,633
Operating income	—				—				385				717				—				1,102
Interest income	217				—				7				2				(217		)		9
Interest expense	—				(105		)		(642		)		(90		)		217				(620		)
Equity in earnings from unconsolidated affiliates	—				—				13				3				—				16
Gain (loss) on foreign currency transactions	—				—				35				(80		)		—				(45		)
Gain on debt extinguishment	—				—				229				—				—				229
Other gain, net	—				—				2				5				—				7
Income (loss) before income taxes and equity in earnings from subsidiaries	217				(105		)		29				557				—				698
Income tax benefit (expense)	(84		)		40				(104		)		(90		)		—				(238		)
Income (loss) before equity in earnings from subsidiaries	133				(65		)		(75		)		467				—				460
Equity in earnings from subsidiaries	282				347				422				—				(1,051		)		—
Net income	415				282				347				467				(1,051		)		460
Net income attributable to noncontrolling interests	—				—				—				(45		)		—				(45		)
Net income attributable to Hilton stockholders	$	415			$	282			$	347			$	422			$	(1,051	)		$	415
Comprehensive income	$	557			$	288			$	417			$	551			$	(1,193	)		$	620
Comprehensive income attributable to noncontrolling interests	—				—				—				(63		)		—				(63		)
Comprehensive income attributable to Hilton stockholders	$	557			$	288			$	417			$	488			$	(1,193	)		$	557

	Year Ended December 31, 2015
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Operating Activities:
Net cash provided by operating activities	$	—			$	184			$	1,076			$	570			$	(436	)		$	1,394
Investing Activities:
Capital expenditures for property and equipment	—				—				(42		)		(268		)		—				(310		)
Acquisitions, net of cash acquired	—				—				—				(1,410		)		—				(1,410		)
Payments received on other financing receivables	—				—				1				4				—				5
Issuance of other financing receivables	—				—				(9		)		(2		)		—				(11		)
Investments in affiliates	—				—				(5		)		—				—				(5		)
Distributions from unconsolidated affiliates	—				—				19				12				—				31
Issuance of intercompany receivables	—				—				(229		)		—				229				—
Payments received on intercompany receivables	—				—				184				—				(184		)		—
Proceeds from asset dispositions	—				—				—				2,205				—				2,205
Change in restricted cash and cash equivalents	—				—				—				(14		)		—				(14		)
Contract acquisition costs	—				—				(23		)		(14		)		—				(37		)
Software capitalization costs	—				—				(62		)		—				—				(62		)
Net cash provided by (used in) investing activities	—				—				(166		)		513				45				392
Financing Activities:
Borrowings	—				—				—				48				—				48
Repayment of debt	—				(775		)		—				(849		)		—				(1,624		)
Intercompany borrowings	—				—				—				229				(229		)		—
Repayment of intercompany borrowings	—				—				—				(184		)		184				—
Change in restricted cash and cash equivalents	—				—				—				(10		)		—				(10		)
Intercompany transfers	138				591				(781		)		52				—				—
Dividends paid	(138		)		—				—				—				—				(138		)
Intercompany dividends	—				—				(184		)		(252		)		436				—
Distributions to noncontrolling interests	—				—				—				(8		)		—				(8		)
Excess tax benefits from share-based compensation	—				—				8				—				—				8
Net cash used in financing activities	—				(184		)		(957		)		(974		)		391				(1,724		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				(19		)		—				(19		)
Net increase (decrease) in cash and cash equivalents	—				—				(47		)		90				—				43
Cash and cash equivalents, beginning of period	—				—				270				296				—				566
Cash and cash equivalents, end of period	$	—			$	—			$	223			$	386			$	—			$	609

	Year Ended December 31, 2014
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Operating Activities:
Net cash provided by operating activities	$	—			$	—			$	1,112			$	532			$	(278	)		$	1,366
Investing Activities:
Capital expenditures for property and equipment	—				—				(27		)		(241		)		—				(268		)
Payments received on other financing receivables	—				—				17				3				—				20
Issuance of other financing receivables	—				—				—				(1		)		—				(1		)
Investments in affiliates	—				—				(9		)		—				—				(9		)
Distributions from unconsolidated affiliates	—				—				36				2				—				38
Proceeds from asset dispositions	—				—				10				34				—				44
Contract acquisition costs	—				—				(19		)		(46		)		—				(65		)
Software capitalization costs	—				—				(69		)		—				—				(69		)
Net cash used in investing activities	—				—				(61		)		(249		)		—				(310		)
Financing Activities:
Borrowings	—				—				—				350				—				350
Repayment of debt	—				(1,000		)		—				(424		)		—				(1,424		)
Debt issuance costs	—				(6		)		—				(3		)		—				(9		)
Change in restricted cash and cash equivalents	—				—				—				5				—				5
Capital contribution	—				—				—				22				(9		)		13
Proceeds from intercompany sales leaseback transaction	—				—				—				22				(22		)		—
Intercompany transfers	—				1,006				(1,110		)		104				—				—
Intercompany dividends	—				—				—				(309		)		309				—
Distributions to noncontrolling interests	—				—				—				(5		)		—				(5		)
Net cash used in financing activities	—				—				(1,110		)		(238		)		278				(1,070		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				(14		)		—				(14		)
Net increase (decrease) in cash and cash equivalents	—				—				(59		)		31				—				(28		)
Cash and cash equivalents, beginning of period	—				—				329				265				—				594
Cash and cash equivalents, end of period	$	—			$	—			$	270			$	296			$	—			$	566

	Year Ended December 31, 2013
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Operating Activities:
Net cash provided by operating activities	$	—			$	—			$	1,821			$	383			$	(103	)		$	2,101
Investing Activities:
Capital expenditures for property and equipment	—				—				(23		)		(231		)		—				(254		)
Acquisitions, net of cash acquired	—				—				—				(30		)		—				(30		)
Payments received on other financing receivables	—				—				4				1				—				5
Issuance of other financing receivables	—				—				(6		)		(4		)		—				(10		)
Investments in affiliates	—				—				(4		)		—				—				(4		)
Distributions from unconsolidated affiliates	—				—				33				—				—				33
Contract acquisition costs	—				—				(14		)		(30		)		—				(44		)
Software capitalization costs	—				—				(78		)		—				—				(78		)
Net cash used in investing activities	—				—				(88		)		(294		)		—				(382		)
Financing Activities:
Net proceeds from issuance of common stock	1,243				—				—				—				—				1,243
Borrowings	—				9,062				—				5,026				—				14,088
Repayment of debt	—				(1,600		)		(15,245		)		(358		)		—				(17,203		)
Debt issuance costs	—				(123		)		—				(57		)		—				(180		)
Change in restricted cash and cash equivalents	—				—				222				(29		)		—				193
Intercompany transfers	(1,243		)		(7,339		)		13,077				(4,495		)		—				—
Intercompany dividends	—				—				—				(103		)		103				—
Distributions to noncontrolling interests	—				—				—				(4		)		—				(4		)
Net cash used in financing activities	—				—				(1,946		)		(20		)		103				(1,863		)
Effect of exchange rate changes on cash and cash equivalents	—				—				—				(17		)		—				(17		)
Net increase (decrease) in cash and cash equivalents	—				—				(213		)		52				—				(161		)
Cash and cash equivalents, beginning of period	—				—				542				213				—				755
Cash and cash equivalents, end of period	$	—			$	—			$	329			$	265			$	—			$	594

Note 28: Selected Quarterly Financial Information (unaudited)

The following table sets forth the historical unaudited quarterly financial data for the periods indicated. The information for each of these periods has been prepared on the same basis as the audited consolidated financial statements and, in our opinion, reflects all adjustments necessary to present fairly our financial results. Operating results for previous periods do not necessarily indicate results that may be achieved in any future period.

	2015
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
	(in millions, except per share data)
Revenues	$	2,599			$	2,922			$	2,895			$	2,856			$	11,272
Operating income	490				427				663				491				2,071
Net income	150				167				283				816				1,416
Net income attributable to Hilton stockholders	150				161				279				814				1,404
Basic and diluted earnings per share(1)	$	0.15			$	0.16			$	0.28			$	0.82			$	1.42

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(1)	The sum of the earnings per share for the four quarters differs from annual earnings per share due to the required method of computing the weighted average shares outstanding in interim periods.

	2014
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
	(in millions, except per share data)
Revenues	$	2,363			$	2,667			$	2,644			$	2,828			$	10,502
Operating income	338				435				445				455				1,673
Net income	124				212				187				159				682
Net income attributable to Hilton stockholders	123				209				183				158				673
Basic and diluted earnings per share	$	0.12			$	0.21			$	0.19			$	0.16			$	0.68

Note 29: Subsequent Events

In February 2016, we announced a plan to separate a substantial portion of our ownership business, consisting primarily of our owned hotels located in the U.S., as well as our timeshare business from Hilton to form two additional new publicly traded companies.

We will disclose more details of the spin-off transactions upon the filing of Form 10 registration statements with the Securities and Exchange Commission, including more financial and other details. The transactions are subject to customary conditions, including, but not limited to, the receipt of opinions concerning the tax-free natures of the transactions and the qualification of the entity holding the ownership business as a real estate investment trust for U.S. federal income tax purposes, normal and customary regulatory approvals and third-party consents, the execution of intercompany agreements, arrangement of adequate financing facilities, the effectiveness of the registration statements and final approval by Hilton’s Board of Directors. The spin-off transactions will not require a stockholder vote. The spin-offs are expected to be completed by the end of 2016, but there can be no assurance regarding the ultimate timing of the spin-offs or that either or both of the spin-offs will ultimately occur.