Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Management’s Report on Internal Control Over Financial Reporting	70
Report of Independent Registered Public Accounting Firm	71
Report of Independent Registered Public Accounting Firm	72
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2016 and 2015	73
Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014	74
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014	75
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014	76
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2016, 2015 and 2014	77
Notes to Consolidated Financial Statements	78

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, 2016. 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, 2016.

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, 2016. 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, 2016, 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, 2016, 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, 2016 and 2015, 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, 2016 of Hilton Worldwide Holdings Inc. and our report dated February 15, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia

February 15, 2017

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, 2016 and 2015, 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, 2016. 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, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, 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, 2016, 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 15, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia

February 15, 2017

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	December 31,
2016				2015
ASSETS
Current Assets:
Cash and cash equivalents	$	1,418			$	609
Restricted cash and cash equivalents	266				247
Accounts receivable, net of allowance for doubtful accounts of $36 and $30	1,005				876
Inventories	541				442
Current portion of financing receivables, net	138				129
Prepaid expenses	137				147
Income taxes receivable	13				97
Other	39				38
Total current assets (variable interest entities - $167 and $141)	3,557				2,585
Property, Intangibles and Other Assets:
Property and equipment, net	8,930				9,119
Financing receivables, net	963				887
Investments in affiliates	114				138
Goodwill	5,822				5,887
Brands	4,848				4,919
Management and franchise contracts, net	1,019				1,149
Other intangible assets, net	507				586
Deferred income tax assets	117				78
Other	334				274
Total property, intangibles and other assets (variable interest entities - $569 and $481)	22,654				23,037
TOTAL ASSETS	$	26,211			$	25,622
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	2,453			$	2,206
Current maturities of long-term debt	98				94
Current maturities of timeshare debt	73				110
Income taxes payable	60				33
Total current liabilities (variable interest entities - $124 and $157)	2,684				2,443
Long-term debt	10,020				9,857
Timeshare debt	621				392
Deferred revenues	64				283
Deferred income tax liabilities	4,575				4,630
Liability for guest loyalty program	889				784
Other	1,509				1,282
Total liabilities (variable interest entities - $766 and $627)	20,362				19,671
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, 2016 and 2015	—				—
Common stock, $0.01 par value; 10,000,000,000 authorized shares, 329,351,581 issued and 329,341,992 outstanding as of December 31, 2016 and 329,162,376 issued and 329,152,787 outstanding as of December 31, 2015(1)	10				10
Additional paid-in capital	10,213				10,151
Accumulated deficit	(3,323		)		(3,392		)
Accumulated other comprehensive loss	(1,001		)		(784		)
Total Hilton stockholders' equity	5,899				5,985
Noncontrolling interests	(50		)		(34		)
Total equity	5,849				5,951
TOTAL LIABILITIES AND EQUITY	$	26,211			$	25,622

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(1)	Common stock shares authorized, issued and outstanding have been adjusted to reflect the 1-for-3 reverse stock split that occurred on January 3, 2017.

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

	Year Ended December 31,
	2016				2015				2014
Revenues
Owned and leased hotels	$	4,126			$	4,233			$	4,239
Management and franchise fees and other	1,701				1,601				1,401
Timeshare	1,390				1,308				1,171
	7,217				7,142				6,811
Other revenues from managed and franchised properties	4,446				4,130				3,691
Total revenues	11,663				11,272				10,502
Expenses
Owned and leased hotels	3,100				3,168				3,252
Timeshare	948				897				767
Depreciation and amortization	686				692				628
Impairment loss	15				9				—
General, administrative and other	616				611				491
	5,365				5,377				5,138
Other expenses from managed and franchised properties	4,446				4,130				3,691
Total expenses	9,811				9,507				8,829
Gain on sales of assets, net	9				306				—
Operating income	1,861				2,071				1,673
Interest income	12				19				10
Interest expense	(587		)		(575		)		(618		)
Equity in earnings from unconsolidated affiliates	8				23				19
Gain (loss) on foreign currency transactions	(13		)		(41		)		26
Other gain (loss), net	(26		)		(1		)		37
Income before income taxes	1,255				1,496				1,147
Income tax expense	(891		)		(80		)		(465		)
Net income	364				1,416				682
Net income attributable to noncontrolling interests	(16		)		(12		)		(9		)
Net income attributable to Hilton stockholders	$	348			$	1,404			$	673
Earnings per share(1):
Basic	$	1.06			$	4.27			$	2.05
Diluted	$	1.05			$	4.26			$	2.05
Cash dividends declared per share(1)	$	0.84			$	0.42			$	—

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(1)	Weighted average shares outstanding used in the computation of basic and diluted earnings per share and cash dividends declared per share were adjusted to reflect the 1-for-3 reverse stock split that occurred on January 3, 2017.

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

	Year Ended December 31,
	2016				2015				2014
Net income	$	364			$	1,416			$	682
Other comprehensive loss, net of tax benefit (expense):
Currency translation adjustment, net of tax of $19, $(8), and $(73)	(159		)		(134		)		(299		)
Pension liability adjustment, net of tax of $(2), $10, and $27	(57		)		(15		)		(45		)
Cash flow hedge adjustment, net of tax of $2, $4, and $5	(2		)		(7		)		(9		)
Total other comprehensive loss	(218		)		(156		)		(353		)
Comprehensive income	146				1,260				329
Comprehensive income attributable to noncontrolling interests	(15		)		(12		)		(14		)
Comprehensive income attributable to Hilton stockholders	$	131			$	1,248			$	315

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Year Ended December 31,
	2016				2015				2014
Operating Activities:
Net income	$	364			$	1,416			$	682
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	686				692				628
Impairment loss	15				9				—
Gain on sales of assets, net	(9		)		(306		)		—
Equity in earnings from unconsolidated affiliates	(8		)		(23		)		(19		)
Loss (gain) on foreign currency transactions	13				41				(26		)
Other loss (gain), net	26				1				(37		)
Share-based compensation	65				124				78
Amortization of deferred financing costs and other	32				38				50
Distributions from unconsolidated affiliates	22				26				22
Deferred income taxes	(79		)		(479		)		14
Changes in operating assets and liabilities:
Accounts receivable, net	(143		)		(47		)		(143		)
Inventories	15				(39		)		56
Prepaid expenses	—				(27		)		(8		)
Income taxes receivable	84				35				(57		)
Other current assets	(2		)		32				(10		)
Accounts payable, accrued expenses and other	217				59				8
Income taxes payable	28				13				10
Change in timeshare financing receivables	(54		)		(49		)		(27		)
Change in deferred revenues	(219		)		(212		)		(179		)
Change in liability for guest loyalty program	154				64				206
Change in other liabilities	199				154				12
Other	(56		)		(115		)		47
Net cash provided by operating activities	1,350				1,407				1,307
Investing Activities:
Capital expenditures for property and equipment	(317		)		(310		)		(268		)
Acquisitions, net of cash acquired	—				(1,402		)		—
Proceeds from asset dispositions	11				2,205				44
Contract acquisition costs	(55		)		(37		)		(65		)
Capitalized software costs	(81		)		(62		)		(69		)
Other	(36		)		20				48
Net cash provided by (used in) investing activities	(478		)		414				(310		)
Financing Activities:
Borrowings	4,715				48				350
Repayment of debt	(4,359		)		(1,624		)		(1,424		)
Debt issuance costs	(76		)		—				(9		)
Capital contribution	—				—				13
Dividends paid	(277		)		(138		)		—
Distributions to noncontrolling interests	(32		)		(8		)		(5		)
Excess tax benefits from share-based compensation	—				8				—
Net cash used in financing activities	(29		)		(1,714		)		(1,075		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	(15		)		(19		)		(14		)
Net increase (decrease) in cash, restricted cash and cash equivalents	828				88				(92		)
Cash, restricted cash and cash equivalents, beginning of period	856				768				860
Cash, restricted cash and cash equivalents, end of period	$	1,684			$	856			$	768

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(1)			Amount
Balance as of December 31, 2013	328			$	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 income (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	328			10				10,028				(4,658		)		(628		)		(38		)		4,714
Share-based compensation	1			—				115				—				—				—				115
Net income	—			—				—				1,404				—				12				1,416
Other comprehensive 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	329			10				10,151				(3,392		)		(784		)		(34		)		5,951
Share-based compensation	—			—				62				—				—				—				62
Net income	—			—				—				348				—				16				364
Other comprehensive loss, net of tax:
Currency translation adjustment	—			—				—				—				(158		)		(1		)		(159		)
Pension liability adjustment	—			—				—				—				(57		)		—				(57		)
Cash flow hedge adjustment	—			—				—				—				(2		)		—				(2		)
Other comprehensive loss	—			—				—				—				(217		)		(1		)		(218		)
Dividends	—			—				—				(279		)		—				—				(279		)
Cumulative effect of the adoption of ASU 2015-02	—			—				—				—				—				5				5
Deconsolidation of a variable interest entity	—			—				—				—				—				(4		)		(4		)
Distributions	—			—				—				—				—				(32		)		(32		)
Balance as of December 31, 2016	329			$	10			$	10,213			$	(3,323	)		$	(1,001	)		$	(50	)		$	5,849

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(1)	Common stock shares outstanding have been adjusted to reflect the 1-for-3 reverse stock split that occurred on January 3, 2017.

See notes to consolidated financial statements.

HILTON WORLDWIDE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Organization

Organization

Hilton Worldwide Holdings Inc. (the "Parent," or together with its subsidiaries, "Hilton," "we," "us," "our" or the

"Company"), a Delaware corporation, is one of the largest hospitality companies in the world based upon the number of hotel

rooms and timeshare units. We are engaged in owning, leasing, managing and franchising hotels, resorts and timeshare

properties. As of December 31, 2016, we owned, leased, managed or franchised 4,875 hotel and resort properties, totaling 796,440 rooms in 104 countries and territories, as well as 47 timeshare properties comprising 7,657 units.

As of December 31, 2016, affiliates of The Blackstone Group L.P. ("Blackstone") beneficially owned approximately 40.3 percent of our common stock.

Spin-offs

On January 3, 2017, we completed the previously announced spin-offs of our real estate and timeshare businesses into two independent, publicly traded companies: Park Hotels & Resorts Inc. ("Park") and Hilton Grand Vacations Inc. ("HGV") (the "spin-offs"). These consolidated financial statements present the consolidated financial position and results of operations of Hilton as of and for the years ended December 31, 2016, 2015 and 2014, without giving effect to these transactions as they were not completed as of the most recent balance sheet date. See Note 29: "Subsequent Events" for further discussion.

Reverse Stock Split

On January 3, 2017, we completed a 1-for-3 reverse stock split of Hilton's outstanding common stock (the "Reverse Stock Split"). The authorized number of shares of common stock was reduced from 30,000,000,000 to 10,000,000,000, and the authorized number of shares of preferred stock remains 3,000,000,000. Stockholders entitled to fractional shares as a result of the reverse stock split received a cash payment in lieu of receiving fractional shares. All share and share-related information presented in these consolidated financial statements have been retroactively adjusted to reflect the decreased number of shares resulting from the Reverse Stock Split.

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 and homeowners' associations. 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. 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. 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. Application and initiation fees are recognized when all services and conditions have been substantially performed or satisfied by us, generally upon execution of the agreement. We recognize royalty and other franchise fees 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 or acquired 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. 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. We record an estimate of uncollectible accounts as a reduction of sales revenue at the time revenue is recognized on a timeshare interval sale. 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.

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 include unsold, completed timeshare intervals, timeshare intervals under construction and land and infrastructure held for future timeshare interval development at our timeshare properties (collectively, timeshare inventory), 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 estimated fair value less costs to sell, based on the relative sales value. Capital expenditures associated with our timeshare intervals 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 (3 to 5 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.

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 loan 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. There are no significant concentrations of credit risk with any individual counterparty or groups of counterparties. 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 for loan loss 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 for loan loss 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 October 24, 2007 transaction whereby we became a wholly owned subsidiary of an affiliate of Blackstone (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 evaluate goodwill for potential impairment 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 Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Curio - A Collection by Hilton, DoubleTree by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru 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, Tru 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 Honors. 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 and costs to acquire software licenses. 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 Honors

Hilton Honors is a guest loyalty program provided to hotels and timeshare properties. Nearly all of our owned, leased, managed and franchised hotels and timeshare properties participate in the Hilton Honors program. Hilton Honors 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 Honors members, the property or affiliated partner pays Hilton Honors 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 Honors member points are accumulated and may be redeemed for the right to stay at participating properties, as well as for other goods and services from third parties, including, but not limited to, airlines, car rentals, cruises, vacation packages, shopping and dining. We provide Hilton Honors 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 Honors records a liability related to 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 Honors 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 may 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") or a hedge of our foreign currency exposure ("net investment hedge"). 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. If we do not specifically designate a derivative as one of the above, changes in the fair value of undesignated derivative instruments are reported in current period earnings. Likewise, 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).

Insurance

We are self-insured for losses up to our third-party insurance deductibles for general liability, auto liability and workers' compensation at our owned, leased and managed properties that participate in our programs. We purchase insurance coverage for claim amounts that exceed our deductible obligations. In addition, through our captive insurance subsidiary, we participate in a reinsurance arrangement that provides coverage for a certain portion of our deductibles. Our insurance reserves are accrued based on our deductibles related to the estimated 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 carryforwards. 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 carryforwards are expected to be recovered or settled. The realization of deferred tax assets and tax loss and tax credit carryforwards 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 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 August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-15 ("ASU 2016-15"), Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. In November 2016, the FASB issued ASU No. 2016-18 ("ASU 2016-18"), Statement of Cash Flows (Topic 230) - Restricted Cash. This ASU requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The provisions of both ASUs are effective for reporting periods beginning after December 15, 2017 and are to be applied retrospectively; early adoption is permitted. We elected, as permitted by the standards, to early adopt ASU 2016-15 and ASU 2016-18 in the fourth quarter of 2016, and we restated all prior periods presented in the consolidated statements of cash flows. The adoption of ASU 2016-15 did not have a material effect on our consolidated financial statements. The effect of the adoption of ASU 2016-18 on our consolidated statements of cash flows was to include restricted cash and restricted cash equivalents balances in the beginning and end of period balances of cash, restricted cash and cash equivalents. The change in restricted cash and restricted cash equivalents was previously disclosed in operating activities, investing activities and financing activities in the consolidated statements of cash flows.

In April 2015, the FASB issued ASU No. 2015-03 ("ASU 2015-03"), Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs. This ASU requires debt issuance costs related to a recognized debt

liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset, which is consistent with the presentation of debt discounts and premiums. In August 2015, the FASB issued ASU No. 2015-15 ("ASU 2015-15"), Interest - Imputation of Interest (Subtopic 835-30) - Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which clarifies that, absent authoritative guidance in ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the staff of the SEC would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We adopted ASU 2015-03 and ASU 2015-15 retrospectively as of January 1, 2016. As a result, approximately $94 million of debt issuance costs that were previously presented in other non-current assets as of December 31, 2015 are now included within long-term debt and timeshare debt. We elected to continue presenting the debt issuance costs related to our line-of-credit arrangements within other non-current assets.

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. We elected, as permitted by the standard, to adopt ASU 2015-02 as of January 1, 2016 using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of January 1, 2016 of approximately $5 million. Additionally, certain consolidated entities that were not previously considered VIEs prior to the adoption of ASU 2015-02 were considered to be VIEs for which we are the primary beneficiary and continue to be consolidated following adoption; prior period VIE disclosures do not include the balances or activity associated with these VIEs.

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, including operating leases, to be recognized in the statement of financial position as right-of-use assets and lease liabilities by lessees. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach and are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. We are currently evaluating the effect that this ASU will have on our consolidated financial statements, but we expect this ASU to have a material effect on our consolidated balance sheet.

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 when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. Subsequent to ASU 2014-09, the FASB has issued several related ASUs. The provisions of ASU 2014-09 and the related ASUs will be effective for us beginning January 1, 2018, and adoption as of the original effective date of January 1, 2017 is permitted. We will not early adopt the new standard. This ASU permits two transition approaches: retrospective or modified retrospective. We are still evaluating our transition approach and expect to reach a decision in early 2017.

We anticipate that ASU 2014-09 will have a material effect on our consolidated financial statements. However, we expect revenue recognition related to our accounting for ongoing royalty and management fee revenues and direct reimbursable fees from our management and franchise agreements and hotel guest transactions at our owned and leased hotels to remain substantially unchanged.

While we are continuing to assess all other potential effects of the standard, we currently believe the provisions of ASU 2014-09 will affect revenue recognition as follows: (i) application and initiation fees for new hotels entering the system will be recognized over the term of the franchise agreement; (ii) certain contract acquisition costs related to our management and franchise agreements will be recognized over the term of the agreements as a reduction to revenue; and (iii) incentive management fees will be recognized to the extent that it is probable that a significant reversal will not occur as a result of future hotel profits or cash flows. We do not expect the changes in revenue recognition for certain contract acquisition costs or incentive management fees to affect the Company’s net income for any full year period. We are currently assessing the effect of the standard on indirect reimbursable fees related to our management and franchise agreements and the accounting for our guest loyalty program. We continue to update our assessment of the effect that ASU 2014-09 and related ASUs will have on our consolidated financial statements, and we will disclose further material effects, if any, when known.

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 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.

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.

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 (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 a 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.

Note 5: Inventories

Inventories were as follows:

	December 31,
	2016				2015
	(in millions)
Timeshare	$	517			$	420
Hotel	24				22
	$	541			$	442

Note 6: Property and Equipment

Property and equipment were as follows:

	December 31,
	2016				2015
	(in millions)
Land	$	3,396			$	3,486
Buildings and leasehold improvements	6,423				6,410
Furniture and equipment	1,295				1,263
Construction-in-progress	105				80
	11,219				11,239
Accumulated depreciation	(2,289		)		(2,120		)
	$	8,930			$	9,119

Depreciation expense of property and equipment, including assets recorded for capital lease assets, was $358 million, $351 million and $313 million during the years ended December 31, 2016, 2015 and 2014, respectively.

As of December 31, 2016 and 2015, property and equipment included approximately $142 million and $144 million, respectively, of capital lease assets primarily consisting of buildings and leasehold improvements, net of $82 million and $71 million, respectively, of accumulated depreciation.

Note 7: Financing Receivables

Financing receivables were as follows:

	December 31, 2016
	Securitized Timeshare				Unsecuritized Timeshare(1)				Other				Total
	(in millions)
Financing receivables	$	204			$	795			$	68			$	1,067
Less: allowance for loan loss	(7		)		(97		)		—				(104		)
	197				698				68				963
Current portion of financing receivables	49				103				2				154
Less: allowance for loan loss	(2		)		(14		)		—				(16		)
	47				89				2				138
Total financing receivables	$	244			$	787			$	70			$	1,101

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

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(1)	Included in this balance, we had $509 million and $163 million of gross timeshare financing receivables securing our revolving non-recourse timeshare financing receivables credit facility (the "Timeshare Facility"), as of December 31, 2016 and 2015, respectively.

Timeshare Financing Receivables

As of December 31, 2016, our timeshare financing receivables had interest rates ranging from 5.25 percent to 20.50 percent, a weighted average interest rate of 11.98 percent, a weighted average remaining term of 7.8 years and maturities through 2028.

Our timeshare financing receivables as of December 31, 2016 mature as follows:

	Securitized Timeshare				Unsecuritized Timeshare
Year	(in millions)
2017	$	49			$	103
2018	48				84
2019	45				89
2020	41				93
2021	33				96
Thereafter	37				433
	253				898
Less: allowance for loan loss	(9		)		(111		)
	$	244			$	787

As of December 31, 2016 and 2015, we had ceased accruing interest on timeshare financing receivables with an aggregate principal balance of $38 million and $32 million, respectively. The following table details an aged analysis of our gross timeshare financing receivables balance:

	December 31,
	2016				2015
	(in millions)
Current	$	1,099			$	1,035
30 - 89 days past due	14				15
90 - 119 days past due	6				4
120 days and greater past due	32				28
	$	1,151			$	1,082

The changes in our allowance for loan loss were as follows:

	(in millions)
Balance as of December 31, 2013	$	92
Write-offs	(30		)
Provision for loan loss	34
Balance as of December 31, 2014	96
Write-offs	(29		)
Provision for loan loss	39
Balance as of December 31, 2015	106
Write-offs	(35		)
Provision for loan loss	49
Balance as of December 31, 2016	$	120

Note 8: Investments in Affiliates

Investments in affiliates were as follows:

	December 31,
	2016				2015
	(in millions)
Equity investments	$	105			$	129
Other investments	9				9
	$	114			$	138

We maintain investments in affiliates accounted for under the equity method, which are primarily investments in entities that owned or leased 15 and 16 hotels as of December 31, 2016 and 2015, respectively. These entities had total debt of approximately $956 million and $959 million as of December 31, 2016 and 2015, 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, 2016, we consolidated eight VIEs: five that own or lease hotel properties; two that issued debt in connection with our timeshare financing receivables securitization transactions (collectively, the "Securitized Timeshare Debt"); and one management company. As of December 31, 2015, prior to the adoption of ASU 2015-02, we consolidated three VIEs that owned or leased hotel properties and two that issued our Securitized Timeshare Debt. Of the three additional entities considered to be VIEs following the adoption of ASU 2015-02, two were previously consolidated by us and one was an unconsolidated investment in affiliate.

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,
	2016				2015
	(in millions)
Cash and cash equivalents	$	64			$	46
Restricted cash and cash equivalents	30				15
Accounts receivable, net	19				19
Property and equipment, net	260				72
Financing receivables, net	244				350
Deferred income tax assets	58				62
Other non-current assets	53				52
Accounts payable, accrued expenses and other	40				35
Long-term debt	418				219
Timeshare debt	244				353
Deferred income tax liabilities	53				1

During the years ended December 31, 2016, 2015 and 2014, 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 December 2016, a VIE that we consolidated as a result of the adoption of ASU 2015-02 sold the hotel asset that it owned. As a result of the sale, we deconsolidated the VIE as we no longer had the power to direct the activities that most significantly affected its performance. Our retained interest in the entity was included in investments in affiliates in our consolidated balance sheet as of December 31, 2016.

In June 2015, one of our consolidated VIEs modified the terms of its capital lease, resulting in a reduction in long-term debt of $24 million. Since the capital lease asset had previously been fully impaired, 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.

Note 10: Goodwill and Intangible Assets

Goodwill

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

	Ownership				Management and Franchise				Total
	(in millions)
Goodwill	$	4,552			$	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
Foreign currency translation	(12		)		(53		)		(65		)
Goodwill	3,563				5,034				8,597
Accumulated impairment losses	(2,775		)		—				(2,775		)
Balance as of December 31, 2016	$	788			$	5,034			$	5,822

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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.

Intangible Assets

Intangible assets were as follows:

	December 31, 2016
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
	(in millions)
Amortizing Intangible Assets:
Management and franchise agreements	$	2,653			$	(1,634	)		$	1,019
Leases	348				(158		)		190
Capitalized software	555				(391		)		164
Hilton Honors	335				(192		)		143
Other	42				(32		)		10
	$	3,933			$	(2,407	)		$	1,526
Non-amortizing Intangible Assets:
Brands	$	4,848			$	—			$	4,848

	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 Honors	341				(174		)		167
Other	38				(28		)		10
	$	3,853			$	(2,118	)		$	1,735
Non-amortizing Intangible Assets:
Brands	$	4,919			$	—			$	4,919

We recorded amortization expense of $328 million, $341 million and $315 million for the years ended December 31, 2016, 2015 and 2014, respectively, including $95 million, $94 million and $79 million, respectively, of amortization expense on capitalized software. Changes to our brands intangible asset during the years ended December 31, 2016 and 2015 were due to foreign currency translations.

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

Year	(in millions)
2017	$	302
2018	282
2019	259
2020	208
2021	81
Thereafter	394
	$	1,526

Note 11: Accounts Payable, Accrued Expenses and Other

Accounts payable, accrued expenses and other were as follows:

	December 31,
	2016				2015
	(in millions)
Accrued employee compensation and benefits	$	584			$	475
Accounts payable	381				331
Liability for guest loyalty program, current	543				494
Deposit liabilities	218				212
Deferred revenues, current	65				65
Insurance reserves, current	99				90
Other accrued expenses	563				539
	$	2,453			$	2,206

Deferred revenues and deposit liabilities are related to our timeshare business and hotel operations. Other accrued expenses consist of taxes, rent, interest and various 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, 2016, as well as issuances and repayments related to financing transactions that occurred during the year ended December 31, 2016 were as follows:

	December 31, 2016														December 31, 2015
	Interest
	Rate(1)		Balance				Issuances				Repayments				Balance
	(%)		(in millions)
Senior notes due 2021	5.625		$	1,500			$	—			$	—			$	1,500
Senior notes due 2024(2)	4.25		1,000				1,000				—				—
Senior notes due 2024(3)	6.125		300				300				—				—
Senior secured term loan facility due 2020	3.50		750				—				(250		)		1,000
Senior secured term loan facility due 2023(4)	3.26		3,209				—				(16		)		3,225
Senior secured term loan facility due 2021(3)	2.94		200				200				—				—
Senior unsecured term loan facility due 2021(5)	2.22		750				750				—				—
Commercial mortgage-backed securities loan due 2018	N/A		—				—				(3,418		)		3,418
Commercial mortgage-backed securities loans due 2023 to 2026(5)	4.17		2,000				2,000				—				—
Mortgage loan due 2018	N/A		—				—				(450		)		450
Mortgage loan due 2026(5)	4.17		165				165				(104		)		104
Other mortgage loans and other property debt due 2017 to 2022(6)	2.95		63												62
Other unsecured notes due 2017	7.50		54												54
Capital lease obligations due 2018 to 2094	6.38		242												245
			10,233												10,058
Less: unamortized deferred financing costs and discounts			(115		)										(107		)
Less: current maturities of long-term debt(7)			(98		)										(94		)
			$	10,020											$	9,857

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(1)	Weighted average rate, where applicable.

(2)	Issued by Hilton.

(3)	Issued by HGV.

(4)	This term loan was amended during the year ended December 31, 2016, as discussed under "Senior Credit Facilities" below.

(5)	Issued by Park.

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

(7)	Net of unamortized deferred financing costs and discounts attributable to current maturities of long-term debt.

Senior Notes

In November 2016, HGV issued $300 million aggregate principal amount of 6.125% senior notes due 2024 (the "6.125% Senior Notes due 2024") and incurred $8 million of debt issuance costs. Interest on the 6.125% Senior Notes due 2024 is payable semi-annually in arrears on June 1 and December 1 of each year, beginning in June 2017. The 6.125% Senior Notes due 2024 are guaranteed on a senior unsecured basis by certain HGV subsidiaries.

In August 2016, Hilton issued $1.0 billion aggregate principal amount of 4.25% senior notes due 2024 (the "4.25% Senior Notes due 2024") and incurred $20 million of debt issuance costs. Interest on the 4.25% Senior Notes due 2024 is payable semi-annually in arrears on March 1 and September 1 of each year, beginning in March 2017.

The senior notes due 2021 (the "Senior Notes due 2021") and the 4.25% Senior Notes due 2024 are guaranteed on a senior unsecured basis by the same subsidiaries as the senior secured credit facility that we entered into in 2013 (the "2013 Senior Secured Credit Facility"). See below and Note 27: "Condensed Consolidating Guarantor Financial Information" for additional details.

Senior Credit Facilities

Senior Secured Credit Facilities

In December 2016, HGV entered into a senior secured credit facility (the "2016 Senior Secured Credit Facility"), consisting of a $200 million senior secured revolving credit facility (the "2016 Revolving Credit Facility") and a $200 million senior secured term loan facility (the "2016 Term Loan"), each with a five-year maturity. The 2016 Revolving Credit Facility allows for up to $30 million to be drawn in the form of letters of credit. As of December 31, 2016, we had no letters of credit or borrowings outstanding under the 2016 Revolving Credit Facility. There is a minimum commitment fee of 0.30 percent per annum under the 2016 Revolving Credit Facility in respect of the unused commitments thereunder. The 2016 Term Loan bears interest at a variable rate, which is payable quarterly. The obligations under the 2016 Senior Secured Credit Facility are unconditionally and irrevocably guaranteed by Hilton on an unsecured basis, through the date of the spin-offs, and certain HGV subsidiaries on a secured basis.

The 2013 Senior Secured Credit Facility, which remained with Hilton following the spin-offs, consists of a $1.0 billion senior secured revolving credit facility (the "2013 Revolving Credit Facility") and a senior secured term loan facility (the "2013 Term Loans"). The obligations of the 2013 Senior Secured Credit Facility are unconditionally and irrevocably guaranteed by us and substantially all of our direct or indirect wholly owned domestic subsidiaries, excluding our subsidiaries that were designated for spin-off to Park and HGV.

In November 2016, we amended the 2013 Revolving Credit Facility to extend the maturity to November 2021 and incurred $5 million of debt issuance costs. As of December 31, 2016, we had $45 million of letters of credit outstanding under the 2013 Revolving Credit Facility and a borrowing capacity of $955 million. We are required to pay a commitment fee of 0.125 percent per annum under the 2013 Revolving Credit Facility in respect of the unused commitments thereunder.

In August 2016, we amended the 2013 Term Loans pursuant to which $3,225 million of outstanding 2013 Term Loans were converted into a new tranche of 2013 Term Loans due October 2023 with interest of LIBOR plus 2.50 percent per annum. In connection with the modification of the 2013 Term Loans, we recognized an $8 million discount as a reduction to long-term debt in our consolidated balance sheet and $4 million of other debt issuance costs included in other gain (loss), net in our consolidated statement of operations.

Senior Unsecured Credit Facility

In December 2016, Park entered into a senior unsecured credit facility (the "Senior Unsecured Credit Facility"), consisting of a $1.0 billion senior unsecured revolving credit facility (the "Unsecured Revolving Credit Facility") with a four-year maturity and a $750 million senior unsecured term loan facility (the "Unsecured Term Loan") with a five-year maturity. Both components of the Senior Unsecured Credit Facility bear interest at a variable rate, which is payable monthly or at the end of any applicable LIBOR interest period, but not less frequently than once every three months. We incurred $7 million and $6 million of debt issuance costs in connection with the Unsecured Revolving Credit Facility and Unsecured Term Loan, respectively. The Unsecured Revolving Credit Facility allows for up to $50 million to be drawn in the form of letters of credit and up to $50 million for short-term swingline borrowings. There is a commitment fee under the Unsecured Revolving Credit Facility in respect of the unused commitments thereunder of 0.20 percent to 0.30 percent per annum, depending on the usage of the Unsecured Revolving Credit Facility. Borrowings under the Unsecured Revolving Credit Facility were not permitted until the consummation of the spin-offs and, therefore, there were no letters of credit or borrowings outstanding under the Unsecured Revolving Credit Facility as of December 31, 2016.

CMBS and Mortgage Loans

In October 2016, we issued two new commercial mortgage-backed securities loans (the "2016 CMBS Loans") for Park, including a $725 million loan that bears interest at 4.11 percent per annum, matures in November 2023 and is secured by two of our U.S. owned real estate assets, and a $1,275 million loan that bears interest at 4.20 percent per annum, matures in November 2026 and is secured by one of our U.S. owned real estate assets. In connection with these issuances, we incurred $8 million of debt issuance costs.

During the year ended December 31, 2016, we repaid in full the commercial mortgage-backed securities loan entered into in 2013 (the "2013 CMBS Loan") and, as a result, all collateral securing it was released. In connection with the repayment, we wrote-off $19 million of debt issuance costs to other gain (loss), net in our consolidated statement of operations.

In November 2016, we repaid a $104 million mortgage loan secured by one of our U.S. owned hotel properties and issued a new mortgage loan secured by this property (the "2016 Mortgage Loan") in the aggregate amount of $165 million. The 2016 Mortgage Loan bears interest at 4.17 percent per annum and has an initial term of 10 years, with one five-year extension at the lenders' option. Interest is payable monthly in arrears beginning in January 2017.

As a result of an acquisition made during the year ended December 31, 2015, we assumed a $450 million mortgage loan secured by the Bonnet Creek Resort (the "Bonnet Creek Loan"), which was repaid in full during the year ended December 31, 2016.

Our commercial mortgage backed-securities loans and certain of our mortgage loans require us to deposit with the lenders certain cash reserves for restricted uses. As of December 31, 2016 and 2015, our consolidated balance sheets included $49 million of restricted cash and cash equivalents related to the loans outstanding as of each balance sheet date.

Timeshare Debt

Timeshare debt balances and associated interest rates as of December 31, 2016 were as follows:

	December 31,
	2016				2015
	(in millions)
Timeshare Facility with a rate of 1.96%, due 2019	$	450			$	150
Securitized Timeshare Debt with an average rate of 1.97%, due 2026	246				356
	696				506
Less: unamortized portion of deferred financing costs	(2		)		(4		)
Less: current maturities of timeshare debt	(73		)		(110		)
	$	621			$	392

In August 2016, we amended the terms of the Timeshare Facility to, among other things, increase the borrowing capacity from $300 million to $450 million, allowing us to borrow up to the maximum amount until August 2018 and requiring all amounts borrowed to be repaid in August 2019. In December 2016, we borrowed $300 million under the Timeshare Facility. The Timeshare Facility is secured by certain of our timeshare financing receivables. See Note 7: "Financing Receivables" for further information.

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.

We are required to deposit payments received from customers on the pledged timeshare financing receivables and securitized timeshare financing receivables related to the Timeshare Facility and Securitized Timeshare Debt, respectively, into a depository account maintained by a third party. On a monthly basis, the depository account will be used to make any required principal, interest and other payments due with respect to the Timeshare Facility and Securitized Timeshare Debt. The balance in the depository account, totaling $22 million and $17 million as of December 31, 2016 and 2015, respectively, was included in restricted cash and cash equivalents in our consolidated balance sheets.

Debt Maturities

The contractual maturities of our debt as of December 31, 2016 were as follows:

	Long-term Debt				Timeshare Debt
Year	(in millions)
2017	$	105			$	74
2018	60				50
2019	57				486
2020	820				47
2021	2,460				39
Thereafter(1)	6,731				—
	$	10,233			$	696

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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,
	2016				2015
	(in millions)
Hilton Honors points sales(1)	$	29			$	233
Other	35				50
	$	64			$	283

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(1)	In 2013, we sold Hilton Honors points to issuers of Hilton Honors 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,
	2016				2015
	(in millions)
Program surplus	$	446			$	420
Pension obligations	215				183
Other long-term tax liabilities	482				295
Deferred employee compensation and benefits	117				173
Insurance reserves	131				87
Other	118				124
	$	1,509			$	1,282

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 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, 2016, 2015 and 2014, derivatives were used to hedge the interest rate risk associated with variable-rate debt as required by certain loan agreements, as well as foreign exchange risk associated with certain foreign currency denominated cash balances.

During the year ended December 31, 2016, we dedesignated four interest rate swaps that were previously designated as cash flow hedges as they no longer met the criteria for hedge accounting. These interest rate swaps, which swapped three-month LIBOR on the 2013 Term Loans to a fixed rate of 1.87 percent, expire in October 2018 and, as of December 31, 2016, had an aggregate notional amount of $1.45 billion.

As of December 31, 2016, we held 68 short-term foreign exchange forward contracts with an aggregate notional amount of $326 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 fair values of our derivative instruments in our consolidated balance sheets were as follows:

			December 31,
	Balance Sheet Classification		2016				2015
			(in millions)
Cash Flow Hedges:
Interest rate swaps	Other liabilities		N/A				$	15
Non-designated Hedges:
Interest rate swaps	Other liabilities		$	12			N/A
Forward contracts	Other current assets		3				1
Forward contracts	Accounts payable, accrued expenses and other		4				1

Earnings Effect of Derivative Instruments

The amounts of gain (loss) recognized in our consolidated statements of operations and consolidated statements of comprehensive income before any effect for income taxes were as follows:

			Year Ended December 31,
	Classification of Gain (Loss) Recognized		2016				2015				2014
			(in millions)
Cash Flow Hedges:
Interest rate swaps(1)	Other comprehensive loss		$	(7	)		$	(11	)		$	(14	)
Non-designated Hedges:
Interest rate swaps	Other gain (loss), net		4				N/A				N/A
Interest rate swaps(2)	Interest expense		4				N/A				N/A
Forward contracts	Gain (loss) on foreign currency transactions		7				11				1

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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, 2016, 2015 and 2014.

(2)	The amount recognized during the year ended December 31, 2016 is related to the dedesignation of these instruments as cash flow hedges and was reclassified from accumulated other comprehensive loss as the underlying transactions occurred.

Note 16: Fair Value Measurements

We did not elect the fair value measurement option for any of our financial assets or liabilities. The fair value of certain financial instruments and the hierarchy level we used to estimate fair values are shown below:

	December 31, 2016
					Hierarchy Level
	Carrying Value				Level 1				Level 2				Level 3
	(in millions)
Assets:
Cash equivalents	$	958			$	—			$	958			$	—
Restricted cash equivalents	11				—				11				—
Timeshare financing receivables(1)	1,031				—				—				1,153
Liabilities:
Long-term debt(2)(3)	9,843				2,886				—				7,152
Timeshare debt(3)	694				—				—				696
Interest rate swaps	12				—				12				—

	December 31, 2015
					Hierarchy Level
	Carrying Value				Level 1				Level 2				Level 3
	(in millions)
Assets:
Cash equivalents	$	327			$	—			$	327			$	—
Restricted cash equivalents	18				—				18				—
Timeshare financing receivables(1)	976				—				—				1,080
Liabilities:
Long-term debt(2)(3)	9,673				1,619				—				8,267
Timeshare debt(3)	502				—				—				506
Interest rate swaps	15				—				15				—

---

(1)	Carrying value includes allowance for loan loss.

(2)	Excludes capital lease obligations with a carrying value of $242 million and $245 million as of December 31, 2016 and December 31, 2015, respectively, and debt of certain consolidated VIEs with a carrying value of $33 million and $32 million, respectively.

(3)	Carrying value includes unamortized deferred financing costs and discounts.

The fair values of financial instruments not included in this table are estimated to be equal to their carrying values as of December 31, 2016 and December 31, 2015. 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 creditworthiness 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: (i) indicative quotes received for similar issuances; (ii) the expected future cash flows discounted at risk-adjusted rates; or (iii) the carrying value, excluding unamortized deferred financing costs, where the interest rates approximated current market rates.

The estimated fair values of our timeshare debt were based on the carrying values, excluding unamortized deferred financing costs, as the interest rates approximated current market rates.

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.

Note 17: Leases

We lease hotel properties, land, equipment and corporate office space under operating and capital leases. As of December 31, 2016 and 2015, we leased 66 and 69 hotels, respectively, under operating leases, and five hotels under capital leases. As of December 31, 2016 and 2015, 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 2017 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, 2016, were as follows:

	Operating Leases				Capital Leases				Non-Recourse Capital Leases
Year	(in millions)
2017	$	210			$	5			$	14
2018	191				5				23
2019	177				6				23
2020	171				6				24
2021	161				6				24
Thereafter	1,081				105				174
Total minimum rent payments	$	1,991			133				282
Less: amount representing interest					(82		)		(91		)
Present value of net minimum rent payments					$	51			$	191

Rent expense for all operating leases was as follows:

	Year Ended December 31,
	2016				2015				2014
	(in millions)
Minimum rentals	$	268			$	290			$	293
Contingent rentals	120				126				146
	$	388			$	416			$	439

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,
	2016				2015				2014
	(in millions)
U.S. income before tax	$	1,582			$	1,178			$	937
Foreign income (loss) before tax	(327		)		318				210
Income before income taxes	$	1,255			$	1,496			$	1,147

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

	Year Ended December 31,
	2016				2015				2014
	(in millions)
Current:
Federal	$	787			$	446			$	323
State	107				45				28
Foreign	76				68				100
Total current	970				559				451
Deferred:
Federal	(123		)		(527		)		8
State	74				(23		)		10
Foreign	(30		)		71				(4		)
Total deferred	(79		)		(479		)		14
Total provision for income taxes	$	891			$	80			$	465

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,
	2016				2015				2014
	(in millions)
Statutory U.S. federal income tax provision	$	439			$	524			$	402
State income taxes, net of U.S. federal tax benefit	47				53				35
Foreign income tax expense	127				119				56
Foreign losses not subject to U.S. tax	—				—				(7		)
Nontaxable liquidation of subsidiaries	—				(640		)		—
U.S. benefit of foreign taxes	(69		)		(118		)		(55		)
Corporate restructuring	513				—				—
Change in deferred tax asset valuation allowance	(72		)		15				14
Change in basis difference in foreign subsidiaries	20				8				10
Provision (benefit) for uncertain tax positions	(139		)		18				5
Non-deductible transaction costs	27				—				—
Non-deductible share-based compensation	—				23				11
Non-deductible goodwill	—				77				—
Other, net	(2		)		1				(6		)
Provision for income taxes	$	891			$	80			$	465

During the year ended December 31, 2016, we effected two corporate structuring transactions that included (i) the organization of Hilton's assets and subsidiaries in preparation for the spin-offs, and (ii) a restructuring of Hilton's international assets and subsidiaries (the "international restructuring"). The international restructuring involved a transfer of certain assets, including intellectual property used in the international business, from U.S. subsidiaries to foreign subsidiaries, and became effective in December 2016. The transfer of the intellectual property resulted in the recognition of tax expense representing the estimated U.S. tax expected to be paid in future years on income generated from the intellectual property transferred to foreign jurisdictions. Further, our deferred effective tax rate is determined based upon the composition of applicable federal and state tax rates. Due to the changes in the footprint of the Company and the expected applicable tax rates at which our domestic deferred tax assets and liabilities will reverse in future periods as a result of the described structuring activities, our estimated deferred effective tax rate has increased. In total, these structuring transactions resulted in additional income tax expense of $513 million during the three months ended December 31, 2016.

After the 2016 international restructuring, 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. Accordingly, as of December 31, 2016, we released valuation allowances of $32 million against our foreign deferred tax assets.

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.

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,
	2016				2015
	(in millions)
Deferred tax assets:
Net operating loss carryforwards	$	410			$	456
Compensation	228				254
Other reserves	72				88
Capital lease obligations	92				100
Insurance reserves	36				51
Program surplus	84				79
Other	83				108
Total gross deferred tax assets	1,005				1,136
Less: valuation allowance	(507		)		(491		)
Deferred tax assets	498				645
Deferred tax liabilities:
Property and equipment	(2,377		)		(2,198		)
Brands	(1,626		)		(1,889		)
Amortizable intangible assets	(330		)		(520		)
Investments	(64		)		(11		)
Investment in foreign subsidiaries	(39		)		(35		)
Deferred income	(520		)		(544		)
Deferred tax liabilities	(4,956		)		(5,197		)
Net deferred taxes	$	(4,458	)		$	(4,552	)

As of December 31, 2016, we had state and foreign net operating loss carryforwards of $192 million and $1.6 billion, respectively, which resulted in deferred tax assets of $10 million for state jurisdictions and $400 million for foreign jurisdictions. Approximately $17 million of our deferred tax assets as of December 31, 2016 related to net operating loss carryforwards that will expire between 2017 and 2036 with less than $1 million of that amount expiring in 2017. Approximately $393 million of our deferred tax assets as of December 31, 2016 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 $385 million as of December 31, 2016 on the deferred tax assets relating to these state and foreign net operating loss carryforwards. Our total valuation allowance relating to these net operating loss carryforwards and other deferred tax assets increased $16 million during the year ended December 31, 2016.

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,
	2016				2015				2014
	(in millions)
Balance at beginning of year	$	407			$	401			$	435
Additions for tax positions related to the prior year	65				12				25
Additions for tax positions related to the current year	9				8				10
Reductions for tax positions for prior years	(204		)		(4		)		(63		)
Settlements	(21		)		(4		)		(1		)
Lapse of statute of limitations	(3		)		(2		)		(2		)
Currency translation adjustment	—				(4		)		(3		)
Balance at end of year	$	253			$	407			$	401

The changes to our unrecognized tax benefits during the years ended December 31, 2016 and 2015 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, 2016 and 2015, we had accrued approximately $31 million and $27 million, respectively, for the payment of interest and penalties. We accrued approximately $4 million, $5 million and $8 million during the years ended December 31, 2016, 2015 and 2014, respectively. Included in the balance of uncertain tax positions as of December 31, 2016 and 2015 were $217 million and $377 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 $8 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, 2016, we remain subject to federal examinations from 2005-2015, state examinations from 2003-2015 and foreign examinations of our income tax returns for the years 1996 through 2015.

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 Honors 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, in January 2016, we received a 30-day Letter from the IRS and the RAR for the December 2007 through 2010 tax years. The RAR includes the proposed adjustments for tax years December 2007 through 2010, which reflect the carryover effect of the three protested issues from 2006 through October 2007. These proposed adjustments will also be protested in appeals, and formal appeals protests have been submitted. 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 Honors 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. However, as a result of recent developments related to the appeals process discussion that have taken place in 2016, we have determined based on on-going discussions with the IRS, it is more likely than not that we will not recognize the full benefit related to certain of the issues being appealed. Accordingly, as of December 31, 2016, we have recorded a $44 million unrecognized tax benefit.

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. The 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 (i) 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 (ii) 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 of our pension plans, which is the difference between the fair value of plan assets and the projected benefit obligations, in our consolidated balance sheets and make corresponding adjustments for changes in the value through accumulated other comprehensive loss, net of tax.

The following table presents the projected benefit obligation, the 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
	2016				2015				2016				2015				2016				2015
	(in millions)
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year	$	394			$	425			$	391			$	415			$	82			$	115
Service cost	—				—				2				1				2				2
Interest cost	13				16				12				15				2				2
Actuarial loss (gain)	1				(8		)		87				(5		)		2				(1		)
Settlements and curtailments	(2		)		(14		)		—				—				(1		)		(4		)
Effect of foreign exchange rates	—				—				(74		)		(19		)		(1		)		(4		)
Benefits paid	(25		)		(25		)		(14		)		(16		)		(5		)		(28		)
Benefit obligation at end of year	$	381			$	394			$	404			$	391			$	81			$	82
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	265			$	283			$	368			$	390			$	60			$	85
Actual return on plan assets, net of expenses	11				(11		)		42				(1		)		1				—
Employer contributions	18				32				5				13				3				8
Effect of foreign exchange rates	—				—				(65		)		(18		)		—				(1		)
Benefits paid	(25		)		(25		)		(14		)		(16		)		(5		)		(28		)
Settlements	(2		)		(14		)		—				—				(1		)		(4		)
Fair value of plan assets at end of year	267				265				336				368				58				60
Funded status at end of year (underfunded)	(114		)		(129		)		(68		)		(23		)		(23		)		(22		)
Accumulated benefit obligation	$	381			$	394			$	404			$	391			$	81			$	82

Amounts recognized in the consolidated balance sheets consisted of:

	Domestic Plan								U.K. Plan								International Plans
	2016				2015				2016				2015				2016				2015
	(in millions)
Other non-current assets	$	4			$	2			$	—			$	—			$	6			$	7
Other liabilities	(118		)		(131		)		(68		)		(23		)		(29		)		(29		)
Net amount recognized	$	(114	)		$	(129	)		$	(68	)		$	(23	)		$	(23	)		$	(22	)

Amounts recognized in accumulated other comprehensive loss consisted of:

	Domestic Plan												U.K. Plan												International Plans
	2016				2015				2014				2016				2015				2014				2016				2015				2014
	(in millions)
Net actuarial loss	$	—			$	15			$	42			$	41			$	16			$	33			$	3			$	1			$	10
Prior service credit	(3		)		(4		)		(4		)		—				—				—				—				—				—
Amortization of net gain	(3		)		(3		)		(7		)		(2		)		(2		)		(1		)		(1		)		(9		)		(1		)
Net amount recognized	$	(6	)		$	8			$	31			$	39			$	14			$	32			$	2			$	(8	)		$	9

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

	Domestic Plan												U.K. Plan												International Plans
	2016				2015				2014				2016				2015				2014				2016				2015				2014
	(in millions)
Unrecognized net losses	$	2			$	2			$	3			$	4			$	2			$	2			$	—			$	—			$	1
Unrecognized prior service cost	4				4				4				—				—				—				—				—				—
Amount unrecognized	$	6			$	6			$	7			$	4			$	2			$	2			$	—			$	—			$	1

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

	Domestic Plan												U.K. Plan												International Plans
	2016				2015				2014				2016				2015				2014				2016				2015				2014
	(in millions)
Service cost	$	8			$	7			$	7			$	2			$	2			$	1			$	3			$	3			$	2
Interest cost	13				16				17				12				15				17				2				2				4
Expected return on plan assets	(19		)		(19		)		(18		)		(22		)		(25		)		(24		)		(3		)		(4		)		(4		)
Amortization of prior service cost	4				4				4				—				—				—				—				—				—
Amortization of net loss	3				3				1				2				2				1				—				—				1
Settlement losses	—				—				5				—				—				—				—				10				1
Net periodic pension cost (credit)	$	9			$	11			$	16			$	(6	)		$	(6	)		$	(5	)		$	2			$	11			$	4

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

	Domestic Plan						U.K. Plan						International Plans
	2016			2015			2016			2015			2016			2015
Discount rate	4.0	%		4.3	%		2.8	%		3.9	%		3.1	%		3.5	%
Salary inflation	N/A			N/A			1.9			1.7			2.1			2.1
Pension inflation	N/A			N/A			3.1			2.8			1.7			1.6

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

	Domestic Plan									U.K. Plan									International Plans
	2016			2015			2014			2016			2015			2014			2016			2015			2014
Discount rate	4.2	%		3.9	%		4.7	%		3.9	%		3.8	%		4.7	%		3.5	%		3.3	%		4.3	%
Expected return on plan assets	7.3			7.5			7.5			6.5			6.5			6.5			5.4			5.1			6.0
Salary inflation	N/A			N/A			N/A			1.7			1.6			1.9			2.1			2.2			2.3
Pension inflation	N/A			N/A			N/A			2.8			2.8			3.0			1.6			1.8			1.9

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 Hilton stock. Asset allocations are reviewed periodically by the investment managers.

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, 2016 and 2015, was 65 percent and 60 percent, respectively, in funds that invest in equity securities, and 35 percent and 40 percent, respectively, in funds that invest in debt securities. The target asset allocation for the U.K. Plan and the International Plans was 65 percent in funds that invest in equity and debt securities and 35 percent in bond funds as of December 31, 2016 and 2015, respectively.

The following tables present the fair value hierarchy of total plan assets measured at fair value by asset category. The fair values 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, 2016 and 2015.

	December 31, 2016
	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	25				—				—				—				3				6
Debt securities	1				62				—				—				—				—
Bond funds	—				—				—				—				—				6
Common collective trusts	—				139				—				336				—				33
Other	—				40				—				—				—				—
Total	$	26			$	241			$	—			$	336			$	13			$	45

	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
Total	$	66			$	199			$	—			$	368			$	14			$	46

We expect to contribute approximately $21 million, $8 million and $4 million to the Domestic Plan, the U.K. Plan and the International Plans, respectively, in 2017.

As of December 31, 2016, 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)
2017	$	30			$	13			$	9
2018	27				13				5
2019	26				13				5
2020	26				14				5
2021	26				14				5
2022-2026	124				73				24
	$	259			$	140			$	53

As of January 1, 2007, the 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, 2016, the multiple employer plan had combined plan assets of $289 million and a projected benefit obligation of $405 million.

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, 2016 and 2015, these plans had benefit obligations of $19 million and $17 million, respectively, which were fully accrued in other liabilities in our consolidated balance sheets. Expense incurred under the Supplemental Plans for the years ended December 31, 2016 was $3 million and for the years ended December 31, 2015 and 2014 was less than $1 million.

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 during each of the years ended December 31, 2016, 2015 and 2014.

Note 20: Share-Based Compensation

We recorded share-based compensation expense of $91 million, $162 million and $74 million during the years ended December 31, 2016, 2015 and 2014, respectively, which includes amounts reimbursed by hotel owners. The total tax benefit recognized related to this compensation expense was $35 million, $37 million and $34 million for the years ended December 31, 2016, 2015 and 2014, respectively. Share-based compensation expense for the years ended December 31, 2015 and 2014 included compensation expense that was recognized when certain remaining awards granted in connection with our initial public offering vested during 2015 and 2014. Additionally, we terminated a cash-based, long-term incentive plan and reversed the associated accruals resulting in a reduction of compensation expense for the year ended December 31, 2014. As of December 31, 2016 and 2015, we accrued $16 million and $7 million, respectively, in accounts payable, accrued expenses and other in our consolidated balance sheets for certain awards settled in cash.

As of December 31, 2016, unrecognized compensation expense for unvested awards was approximately $99 million, which is expected to be recognized over a weighted-average period of 1.7 years on a straight-line basis. There were 21,823,633 shares of common stock available for future issuance under the Stock Plan as of December 31, 2016.

All share and share-related information have been adjusted to reflect the Reverse Stock Split. See Note 1: "Organization" for further discussion.

RSUs

The following table provides information about our RSU grants for the last three fiscal years:

	Year Ended December 31,
	2016				2015				2014
Number of shares granted	1,169,238				679,546				1,883,454
Weighted average grant date fair value per share	$	59.73			$	82.38			$	64.59
Fair value of shares vested (in millions)(1)	$	40			$	90			$	—

---

(1)	The fair value of shares vested during the year ended December 31, 2014 was less than $1 million.

The following table summarizes the activity of our RSUs during the year ended December 31, 2016:

	Number of Shares			Weighted Average Grant Date Fair Value per Share
Outstanding as of December 31, 2015	1,246,084			$	73.44
Granted	1,169,238			59.73
Vested	(683,262	)		70.50
Forfeited	(107,519	)		66.90
Outstanding as of December 31, 2016	1,624,541			65.24

Options

The following table provides information about our option grants for the last three fiscal years:

	Year Ended December 31,
	2016				2015				2014
Number of options granted	503,150				309,528				334,530
Weighted average exercise price per share	$	58.83			$	82.38			$	64.59
Weighted average grant date fair value per share	$	16.41			$	25.17			$	22.74

The grant date fair value of each of these option grants was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:

	Year Ended December 31,
	2016			2015			2014
Expected volatility(1)	32.00	%		28.00	%		33.00	%
Dividend yield(2)	1.43	%		—	%		—	%
Risk-free rate(3)	1.36	%		1.67	%		1.85	%
Expected term (in years)(4)	6.0			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)	Estimated based on the expected annualized dividend payment at the date of grant. For the 2014 and 2015 options, we had no plans to pay dividends during the expected term at the time of grant.

(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.

The following table summarizes the activity of our options during the year ended December 31, 2016:

	Number of Shares			Weighted Average Exercise Price per Share
Outstanding as of December 31, 2015	616,832			$	73.47
Granted	503,150			58.83
Exercised	(5,724	)		64.59
Forfeited, canceled or expired	(38,227	)		69.03
Outstanding as of December 31, 2016	1,076,031			66.83
Exercisable as of December 31, 2016	293,517			70.57

The weighted average remaining contractual term for options outstanding as of December 31, 2016 was 8.2 years.

Performance Shares

In November 2016, we modified our performance shares whereby we will convert the performance shares granted in 2015 and 2016 to RSUs based on a 100 percent achievement percentage with the same vesting periods as the original awards contingent upon the occurrence of the spin-offs, which was determined to be 100 percent probable. We recognized $0.3 million of incremental expense related to the modification of these grants during the year ended December 31, 2016. We will recognize additional expense of $6.5 million from the modification over the remaining terms of the awards.

The following table provides information about our performance share grants for the last three fiscal years:

	Year Ended December 31,
	2016				2015				2014
Relative Shareholder Return:
Number of shares granted	300,784				204,523				176,661
Weighted average grant date fair value per share	$	62.43			$	98.94			$	70.68
Fair value of shares vested (in millions)	$	16			$	—			$	—
EBITDA CAGR:
Number of shares granted	300,784				204,523				176,661
Weighted average grant date fair value per share	$	58.83			$	82.38			$	64.59
Fair value of shares vested (in millions)	$	12			$	—			$	—

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,
	2016			2015			2014
Expected volatility(1)	31.00	%		24.00	%		30.00	%
Dividend yield(2)	—	%		—	%		—	%
Risk-free rate(3)	0.92	%		1.04	%		0.70	%
Expected term (in years)(4)	2.8			2.8			2.8

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(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)	As dividends are assumed to be reinvested in shares of common stock and dividends will not be paid to the participants of the performance shares unless the shares vest, we utilized a dividend yield of zero percent.

(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.

The following table summarizes the activity of our performance shares during the year ended December 31, 2016:

	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, 2015	366,361			$	86.37			366,361			$	74.49
Granted	300,784			62.43				300,784			58.83
Vested	(152,835	)		70.68				(152,835	)		64.59
Forfeited or canceled	(178,508	)		77.58				(178,508	)		68.61
Outstanding as of December 31, 2016	335,802			76.74				335,802			68.09

DSUs

During the years ended December 31, 2016 and 2015, we issued to our independent directors 11,393 and 6,179 DSUs, respectively, with grant date fair values of $66.12 and $84.96, respectively.

Note 21: Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share ("EPS"). All share and per share amounts have been adjusted to reflect the Reverse Stock Split. See Note 1: "Organization" for further discussion.

	Year Ended December 31,
	2016				2015				2014
	(in millions, except per share amounts)
Basic EPS:
Numerator:
Net income attributable to Hilton stockholders	$	348			$	1,404			$	673
Denominator:
Weighted average shares outstanding	329				329				328
Basic EPS	$	1.06			$	4.27			$	2.05
Diluted EPS:
Numerator:
Net income attributable to Hilton stockholders	$	348			$	1,404			$	673
Denominator:
Weighted average shares outstanding	330				330				329
Diluted EPS	$	1.05			$	4.26			$	2.05

Approximately 1 million share-based compensation awards were excluded from the weighted average shares outstanding in the computation of diluted EPS for the year ended December 31, 2016, and less than 1 million awards were excluded 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, 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		)
Other comprehensive loss before reclassifications	(157		)		(63		)		(5		)		(225		)
Amounts reclassified from accumulated other comprehensive loss	(1		)		6				3				8
Net current period other comprehensive loss	(158		)		(57		)		(2		)		(217		)
Balance as of December 31, 2016	$	(738	)		$	(251	)		$	(12	)		$	(1,001	)

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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 statement of operations):

	Year Ended December 31,
	2016				2015				2014
	(in millions)
Currency translation adjustment:
Sale and liquidation of foreign assets(1)	$	—			$	(25	)		$	3
Gains on net investment hedges(2)	1				—				2
Tax benefit(3)(4)	—				9				—
Total currency translation adjustment reclassifications for the period, net of tax	1				(16		)		5
Pension liability adjustment:
Amortization of prior service cost(5)	(4		)		(4		)		(4		)
Amortization of net loss(5)	(5		)		(5		)		(3		)
Tax expense(3)	3				3				3
Total pension liability adjustment reclassifications for the period, net of tax	(6		)		(6		)		(4		)
Cash flow hedge adjustment:
Dedesignation of interest rate swaps(6)	(4		)		—				—
Tax benefit(3)	1				—				—
Total cash flow hedge adjustment reclassifications for the period, net of tax	(3		)		—				—
Total reclassifications for the period, net of tax	$	(8	)		$	(22	)		$	1

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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 year ended December 31, 2014 in our consolidated statements of operations.

(2)	Reclassified out of accumulated other comprehensive loss to gain (loss) on foreign currency transactions in our consolidated statements 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 years ended December 31, 2016 and 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.

(6)	Reclassified out of accumulated other comprehensive loss to interest expense in our consolidated statements of operations.

Note 23: Business Segments

During the periods presented, our operations were organized in three distinct operating segments: ownership; management and franchise; and timeshare. Each segment was managed separately because of its distinct economic characteristics.

As of December 31, 2016, the ownership segment included 141 properties totaling 57,716 rooms, comprising 120 hotels that we wholly owned or leased, one hotel owned by a consolidated non-wholly owned entity, five hotels owned or leased by consolidated VIEs and 15 hotels that were owned or leased by unconsolidated affiliates. While equity in earnings (losses) from unconsolidated affiliates were not included in our measure of segment revenues, we managed these investments in our ownership segment and the results were included in our measure of segment profits.

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. As of December 31, 2016, this segment included 559 managed hotels and 4,175 franchised hotels totaling 4,734 hotels consisting of 738,724 rooms. This segment also earns fees for managing properties in our ownership and timeshare segments.

The timeshare segment includes the development of vacation ownership clubs and resorts, marketing and selling of timeshare intervals, resort operations and providing timeshare customer financing for the timeshare interests. This segment also provides assistance to third-party developers in selling their timeshare inventory. As of December 31, 2016, this segment included 47 timeshare properties totaling 7,657 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 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 compensation expense; (viii) severance, relocation and other expenses; and (ix) other items.

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

	Year Ended December 31,
	2016				2015				2014
	(in millions)
Revenues:
Ownership	$	4,157			$	4,262			$	4,271
Management and franchise	1,786				1,691				1,468
Timeshare	1,390				1,308				1,171
Segment revenues	7,333				7,261				6,910
Other revenues from managed and franchised properties	4,446				4,130				3,691
Other revenues	102				91				99
Intersegment fees elimination(1)	(218		)		(210		)		(198		)
Total revenues	$	11,663			$	11,272			$	10,502

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(1)	Includes the following intercompany charges that were eliminated in our consolidated financial statements:

	Year Ended December 31,
	2016				2015				2014
	(in millions)
Rental and other fees(a)	$	27			$	25			$	28
Management, royalty and intellectual property fees(b)	135				131				113
Licensing fee(c)	45				43				44
Laundry services(d)	7				7				9
Other(e)	4				4				4
Intersegment fees elimination	$	218			$	210			$	198

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(a)	Represents fees charged to our timeshare segment by our ownership segment.

(b)	Represents fees charged to our ownership segment by our management and franchise segment.

(c)	Represents fees charged to our timeshare segment by the management and franchise segment.

(d)	Represents charges to our ownership segment for services provided by our wholly owned laundry business. Revenues from our laundry business are included in other revenues. The laundry business was owned by Park effective January 3, 2017 upon completion of the spin-offs.

(e)	Represents other intercompany charges, which are a benefit to our ownership segment and a cost to corporate and other.

The following table provides a reconciliation of segment Adjusted EBITDA to consolidated net income:

	Year Ended December 31,
	2016				2015				2014
	(in millions)
Ownership(1)(2)	$	1,029			$	1,064			$	1,000
Management and franchise(2)	1,786				1,691				1,468
Timeshare(2)	381				352				337
Segment Adjusted EBITDA	3,196				3,107				2,805
Corporate and other(2)	(221		)		(228		)		(255		)
Interest expense	(587		)		(575		)		(618		)
Income tax expense	(891		)		(80		)		(465		)
Depreciation and amortization	(686		)		(692		)		(628		)
Interest expense, income tax, depreciation and amortization and impairment loss included in equity in earnings from unconsolidated affiliates	(47		)		(32		)		(37		)
Gain on sales of assets, net	9				306				—
Gain (loss) on foreign currency transactions	(13		)		(41		)		26
FF&E replacement reserve	(56		)		(48		)		(46		)
Share-based compensation expense	(91		)		(162		)		(74		)
Impairment loss	(15		)		(9		)		—
Other gain (loss), net	(26		)		(1		)		37
Other adjustment items(3)	(208		)		(129		)		(63		)
Net income	$	364			$	1,416			$	682

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(1)	Includes unconsolidated affiliate Adjusted EBITDA.

(2)	Our measures of Adjusted EBITDA included intercompany charges that were eliminated in our consolidated financial statements. Refer to the footnote to the segment revenues table for detail of the intercompany charges.

(3)	Includes $22 million and $95 million of severance costs related to the sale of the Waldorf Astoria New York for the years ended December 31, 2016 and 2015, respectively. Also includes $137 million of costs related to the spin-offs for the year ended December 31, 2016.

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

	December 31,
	2016				2015
	(in millions)
Ownership	$	10,979			$	11,269
Management and franchise	10,224				10,392
Timeshare	2,391				1,935
Corporate and other	2,617				2,026
	$	26,211			$	25,622

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

	Year Ended December 31,
	2016				2015				2014
	(in millions)
Ownership	$	270			$	277			$	245
Timeshare	28				17				14
Corporate and other	19				16				9
	$	317			$	310			$	268

Total revenues by country were as follows:

	Year Ended December 31,
	2016				2015				2014
	(in millions)
U.S.	$	9,382			$	8,844			$	7,927
All other	2,281				2,428				2,575
	$	11,663			$	11,272			$	10,502

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, 2016, 2015 and 2014.

Property and equipment, net by country was as follows:

	December 31,
	2016				2015
	(in millions)
U.S.	$	8,438			$	8,612
All other	492				507
	$	8,930			$	9,119

Other than the U.S., there were no countries that individually represented more than 10 percent of total property and equipment, net as of December 31, 2016 and 2015.

Note 24: Commitments and Contingencies

As of December 31, 2016, we had an outstanding guarantee of $5 million, with a remaining term of seven years, for debt and other obligations of a third party. We have one letter of credit for $25 million that has been pledged as collateral for the guarantee. Although we believe it is unlikely that material payments will be required under the guarantee 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, 2016, we had seven contracts containing performance guarantees, with expirations ranging from 2019 to 2030, and possible cash outlays totaling approximately $69 million. Our obligations in future periods depend on the operating performance levels of these hotels over the remaining terms of the performance guarantees. We do not have any letters of credit pledged as collateral against these guarantees. As of December 31, 2016 and 2015, we recorded approximately $11 million and $8 million, respectively, in accounts payable, accrued expenses and other and approximately $17 million and $25 million, respectively, in other liabilities in our consolidated balance sheets for an outstanding performance guarantee that is related to a VIE for which we are not the primary beneficiary.

As of December 31, 2016, we had outstanding commitments under third-party contracts of approximately $43 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 occurs, 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 that we will manage. The junior mezzanine loan will be subordinated to a senior mortgage loan and senior mezzanine loan provided by third parties unaffiliated with us and will be funded on a pro rata basis with these loans as the construction costs are incurred. During the years ended December 31, 2016 and 2015, we funded $34 million and $17 million, respectively, of this commitment, and we expect to fund our remaining commitment of $9 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, 2016, we are committed to purchase approximately $193 million of inventory over a period of three 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, 2016, 2015 and 2014, we purchased $18 million, $17 million

and $29 million, respectively, of timeshare inventory as required under our commitments. As of December 31, 2016, our remaining obligation pursuant to these arrangements was expected to be incurred as follows: $8 million in 2017, $56 million in 2018 and $129 million in 2019.

We are involved in other litigation arising in 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, 2016 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,
	2016				2015
	(in millions)
Balance Sheets
Assets:
Accounts receivable, net	$	19			$	23
Management and franchise contracts, net	20				20
Liabilities:
Accounts payable, accrued expenses and other	11				10

	Year Ended December 31,
	2016				2015				2014
	(in millions)
Statements of Operations
Revenues:
Management and franchise fees and other	$	28			$	24			$	25
Other revenues from managed and franchised properties	166				166				167
Expenses:
Other expenses from managed and franchised properties	166				166				167
Non-operating income and expenses:
Interest income	—				—				1
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 underlying 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,
	2016				2015
	(in millions)
Balance Sheets
Assets:
Accounts receivable, net	$	18			$	21
Management and franchise contracts, net	13				16
Liabilities:
Accounts payable, accrued expenses and other	8				9

	Year Ended December 31,
	2016				2015				2014
	(in millions)
Statements of Operations
Revenues:
Management and franchise fees and other	$	42			$	48			$	60
Other revenues from managed and franchised properties	144				160				293
Expenses:
Depreciation and amortization	1				—				—
Other expenses from managed and franchised properties	144				160				293
Statements of Cash Flows
Investing Activities:
Contract acquisition costs	—				—				7

As of December 31, 2016, entities affiliated with Blackstone held $75 million of the 6.125% Senior Notes due 2024.

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.

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. As a result of this transaction, we entered into a sales and marketing agreement with the affiliate of Blackstone to sell and market these timeshare intervals for which we earned commissions and other fees of $177 million, $154 million and $30 million for the years ended December 31, 2016, 2015 and 2014, respectively, included in our consolidated statements of operations, and had accounts receivable of $20 million and $5 million as of December 31, 2016 and 2015, respectively, in our consolidated balance sheets.

We also purchase products and services from entities affiliated with or owned by Blackstone. The fees paid for these products and services were $9 million, $32 million and $31 million during the years ended December 31, 2016, 2015 and 2014, respectively.

Note 26: Supplemental Disclosures of Cash Flow Information

Interest paid during the years ended December 31, 2016, 2015 and 2014, was $478 million, $485 million and $514 million, respectively.

Income taxes, net of refunds, paid during the years ended December 31, 2016, 2015 and 2014 were $677 million, $475 million and $429 million, respectively.

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

•	In 2016, we transferred $116 million of property and equipment to timeshare inventory for conversion into timeshare units.

•	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 long-term debt of $24 million.

•	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.

•	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.

Note 27: Condensed Consolidating Guarantor Financial Information

In October 2013, Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. (the "2013 Issuers"), entities formed in August 2013 that are 100 percent owned by the Parent, issued the Senior Notes due 2021. In September 2016, Hilton Domestic Operating Company Inc. (together with the 2013 Issuers, the "Subsidiary Issuers"), an entity formed in August 2016 that is 100 percent owned by Hilton Worldwide Finance LLC and a guarantor of the Senior Notes due 2021, assumed the 4.25% Senior Notes due 2024 that were issued in August 2016 by escrow issuers. The Senior Notes due 2021 and the 4.25% Senior Notes due 2024 are referred to as the Hilton 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 that are themselves not issuers of the applicable series of Hilton Senior Notes (together, the "Guarantors"). The indentures that govern the Hilton Senior Notes provide that any subsidiary of the Company that provides a guarantee of the 2013 Senior Secured Credit Facility will guarantee the Hilton Senior Notes.

In connection with the spin-offs, certain entities that were previously guarantors of the Hilton Senior Notes were released and as of December 31, 2016 no longer guarantee the Hilton Senior Notes. As of December 31, 2016, none of our foreign subsidiaries or U.S. subsidiaries owned by foreign subsidiaries or conducting foreign operations; our non-wholly owned subsidiaries; or our subsidiaries that have been designated for spin-off to Park and HGV guarantee the Hilton Senior Notes (collectively, the "Non-Guarantors"). The condensed consolidating financial information was retrospectively adjusted to present the financial information as of December 31, 2016 and 2015, and for the years ended December 31, 2016, 2015 and 2014 based on the composition the Guarantors and Non-Guarantors at December 31, 2016.

The guarantees are full and unconditional, subject to certain customary release provisions. The indentures that govern the Hilton Senior Notes provide that any Guarantor may be released from its guarantee so long as: (i) the subsidiary is sold or sells all of its assets; (ii) the subsidiary is released from its guaranty under the 2013 Senior Secured Credit Facility; (iii) the subsidiary is declared "unrestricted" for covenant purposes; (iv) the subsidiary is merged with or into the applicable Subsidiary Issuers or another Guarantor or the Guarantor liquidates after transferring all of its assets to the applicable Subsidiary Issuers or another Guarantor; or (v) the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied, in each case in compliance with applicable provisions of the indentures.

The following schedules present the condensed consolidating financial information as of December 31, 2016 and 2015, and for the years ended December 31, 2016, 2015 and 2014, for the Parent, Subsidiary Issuers, Guarantors and Non-Guarantors.

	December 31, 2016
Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	—			$	—			$	25			$	1,393			$	—			$	1,418
Restricted cash and cash equivalents	—				—				96				170				—				266
Accounts receivable, net	—				—				491				514				—				1,005
Intercompany receivables	—				—				—				42				(42		)		—
Inventories	—				—				4				537				—				541
Current portion of financing receivables, net	—				—				1				137				—				138
Prepaid expenses	—				—				27				137				(27		)		137
Income taxes receivable	—				—				30				—				(17		)		13
Other	—				—				1				38				—				39
Total current assets	—				—				675				2,968				(86		)		3,557
Property, Intangibles and Other Assets:
Property and equipment, net	—				—				74				8,856				—				8,930
Financing receivables, net	—				—				64				899				—				963
Investments in affiliates	—				—				18				96				—				114
Investments in subsidiaries	5,889				11,300				6,993				—				(24,182		)		—
Goodwill	—				—				3,824				1,998				—				5,822
Brands	—				—				4,404				444				—				4,848
Management and franchise contracts, net	—				—				716				303				—				1,019
Other intangible assets, net	—				—				297				210				—				507
Deferred income tax assets	10				2				—				117				(12		)		117
Other	—				12				163				159				—				334
Total property, intangibles and other assets	5,899				11,314				16,553				13,082				(24,194		)		22,654
TOTAL ASSETS	$	5,899			$	11,314			$	17,228			$	16,050			$	(24,280	)		$	26,211
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	—			$	26			$	1,461			$	993			$	(27	)		$	2,453
Intercompany payables	—				—				42				—				(42		)		—
Current maturities of long-term debt	—				26				—				72				—				98
Current maturities of timeshare debt	—				—				—				73				—				73
Income taxes payable	—				—				—				77				(17		)		60
Total current liabilities	—				52				1,503				1,215				(86		)		2,684
Long-term debt	—				5,361				981				3,678				—				10,020
Timeshare debt	—				—				—				621				—				621
Deferred revenues	—				—				42				22				—				64
Deferred income tax liabilities	—				—				1,742				2,845				(12		)		4,575
Liability for guest loyalty program	—				—				889				—				—				889
Other	—				12				771				726				—				1,509
Total liabilities	—				5,425				5,928				9,107				(98		)		20,362
Equity:
Total Hilton stockholders' equity	5,899				5,889				11,300				6,993				(24,182		)		5,899
Noncontrolling interests	—				—				—				(50		)		—				(50		)
Total equity	5,899				5,889				11,300				6,943				(24,182		)		5,849
TOTAL LIABILITIES AND EQUITY	$	5,899			$	11,314			$	17,228			$	16,050			$	(24,280	)		$	26,211

	December 31, 2015
Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	—			$	—			$	18			$	591			$	—			$	609
Restricted cash and cash equivalents	—				—				91				156				—				247
Accounts receivable, net	—				—				406				470				—				876
Inventories	—				—				1				441				—				442
Current portion of financing receivables, net	—				—				1				128				—				129
Prepaid expenses	—				—				36				140				(29		)		147
Income taxes receivable	—				—				120				—				(23		)		97
Other	—				—				1				37				—				38
Total current assets	—				—				674				1,963				(52		)		2,585
Property, Intangibles and Other Assets:
Property and equipment, net	—				—				73				9,046				—				9,119
Financing receivables, net	—				—				32				855				—				887
Investments in affiliates	—				—				49				89				—				138
Investments in subsidiaries	6,166				11,854				6,457				—				(24,477		)		—
Goodwill	—				—				3,824				2,063				—				5,887
Brands	—				—				4,405				514				—				4,919
Management and franchise contracts, net	—				—				818				331				—				1,149
Other intangible assets, net	—				—				334				252				—				586
Deferred income tax assets	24				3				—				78				(27		)		78
Other	—				9				147				118				—				274
Total property, intangibles and other assets	6,190				11,866				16,139				13,346				(24,504		)		23,037
TOTAL ASSETS	$	6,190			$	11,866			$	16,813			$	15,309			$	(24,556	)		$	25,622
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, accrued expenses and other	$	—			$	39			$	1,239			$	957			$	(29	)		$	2,206
Current maturities of long-term debt	—				(12		)		—				106				—				94
Current maturities of timeshare debt	—				—				—				110				—				110
Income taxes payable	—				—				—				56				(23		)		33
Total current liabilities	—				27				1,239				1,229				(52		)		2,443
Long-term debt	—				5,659				54				4,144				—				9,857
Timeshare debt	—				—				—				392				—				392
Deferred revenues	—				—				252				31				—				283
Deferred income tax liabilities	—				—				1,819				2,838				(27		)		4,630
Liability for guest loyalty program	—				—				784				—				—				784
Other	205				14				811				252				—				1,282
Total liabilities	205				5,700				4,959				8,886				(79		)		19,671
Equity:
Total Hilton stockholders' equity	5,985				6,166				11,854				6,457				(24,477		)		5,985
Noncontrolling interests	—				—				—				(34		)		—				(34		)
Total equity	5,985				6,166				11,854				6,423				(24,477		)		5,951
TOTAL LIABILITIES AND EQUITY	$	6,190			$	11,866			$	16,813			$	15,309			$	(24,556	)		$	25,622

	Year Ended December 31, 2016
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Revenues
Owned and leased hotels	$	—			$	—			$	—			$	4,129			$	(3	)		$	4,126
Management and franchise fees and other	—				—				1,398				446				(143		)		1,701
Timeshare	—				—				—				1,390				—				1,390
	—				—				1,398				5,965				(146		)		7,217
Other revenues from managed and franchised properties	—				—				4,894				637				(1,085		)		4,446
Total revenues	—				—				6,292				6,602				(1,231		)		11,663
Expenses
Owned and leased hotels	—				—				—				3,187				(87		)		3,100
Timeshare	—				—				—				993				(45		)		948
Depreciation and amortization	—				—				273				413				—				686
Impairment loss	—				—				—				15				—				15
General, administrative and other	—				—				452				178				(14		)		616
	—				—				725				4,786				(146		)		5,365
Other expenses from managed and franchised properties	—				—				4,894				637				(1,085		)		4,446
Total expenses	—				—				5,619				5,423				(1,231		)		9,811
Gain on sales of assets, net	—				—				1				8				—				9
Operating income	—				—				674				1,187				—				1,861
Interest income	—				—				8				4				—				12
Interest expense	—				(261		)		(84		)		(242		)		—				(587		)
Equity in earnings from unconsolidated affiliates	—				—				2				6				—				8
Gain (loss) on foreign currency transactions	—				—				(139		)		126				—				(13		)
Other gain (loss), net	—				1				—				(27		)		—				(26		)
Income (loss) before income taxes and equity in earnings from subsidiaries	—				(260		)		461				1,054				—				1,255
Income tax benefit (expense)	193				100				(295		)		(889		)		—				(891		)
Income (loss) before equity in earnings from subsidiaries	193				(160		)		166				165				—				364
Equity in earnings from subsidiaries	155				315				149				—				(619		)		—
Net income	348				155				315				165				(619		)		364
Net income attributable to noncontrolling interests	—				—				—				(16		)		—				(16		)
Net income attributable to Hilton stockholders	$	348			$	155			$	315			$	149			$	(619	)		$	348
Comprehensive income	$	131			$	153			$	249			$	15			$	(402	)		$	146
Comprehensive income attributable to noncontrolling interests	—				—				—				(15		)		—				(15		)
Comprehensive income attributable to Hilton stockholders	$	131			$	153			$	249			$	—			$	(402	)		$	131

	Year Ended December 31, 2015
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Revenues
Owned and leased hotels	$	—			$	—			$	—			$	4,236			$	(3	)		$	4,233
Management and franchise fees and other	—				—				1,331				410				(140		)		1,601
Timeshare	—				—				—				1,308				—				1,308
	—				—				1,331				5,954				(143		)		7,142
Other revenues from managed and franchised properties	—				—				4,568				620				(1,058		)		4,130
Total revenues	—				—				5,899				6,574				(1,201		)		11,272
Expenses
Owned and leased hotels	—				—				—				3,253				(85		)		3,168
Timeshare	—				—				—				940				(43		)		897
Depreciation and amortization	—				—				288				404				—				692
Impairment losses	—				—				—				9				—				9
General, administrative and other	—				—				473				153				(15		)		611
	—				—				761				4,759				(143		)		5,377
Other expenses from managed and franchised properties	—				—				4,568				620				(1,058		)		4,130
Total expenses	—				—				5,329				5,379				(1,201		)		9,507
Gain on sales of assets, net	—				—				—				306				—				306
Operating income	—				—				570				1,501				—				2,071
Interest income	—				—				16				3				—				19
Interest expense	—				(281		)		(55		)		(239		)		—				(575		)
Equity in earnings from unconsolidated affiliates	—				—				2				21				—				23
Gain (loss) on foreign currency transactions	—				—				77				(118		)		—				(41		)
Other gain (loss), net	—				—				(2		)		1				—				(1		)
Income (loss) before income taxes and equity in earnings from subsidiaries	—				(281		)		608				1,169				—				1,496
Income tax benefit (expense)	(7		)		108				150				(331		)		—				(80		)
Income (loss) before equity in earnings from subsidiaries	(7		)		(173		)		758				838				—				1,416
Equity in earnings from subsidiaries	1,411				1,584				826				—				(3,821		)		—
Net income	1,404				1,411				1,584				838				(3,821		)		1,416
Net income attributable to noncontrolling interests	—				—				—				(12		)		—				(12		)
Net income attributable to Hilton stockholders	$	1,404			$	1,411			$	1,584			$	826			$	(3,821	)		$	1,404
Comprehensive income	$	1,248			$	1,404			$	1,546			$	727			$	(3,665	)		$	1,260
Comprehensive income attributable to noncontrolling interests	—				—				—				(12		)		—				(12		)
Comprehensive income attributable to Hilton stockholders	$	1,248			$	1,404			$	1,546			$	715			$	(3,665	)		$	1,248

	Year Ended December 31, 2014
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Revenues
Owned and leased hotels	$	—			$	—			$	—			$	4,242			$	(3	)		$	4,239
Management and franchise fees and other	—				—				1,135				368				(102		)		1,401
Timeshare	—				—				—				1,171				—				1,171
	—				—				1,135				5,781				(105		)		6,811
Other revenues from managed and franchised properties	—				—				4,081				571				(961		)		3,691
Total revenues	—				—				5,216				6,352				(1,066		)		10,502
Expenses
Owned and leased hotels	—				—				—				3,321				(69		)		3,252
Timeshare	—				—				—				790				(23		)		767
Depreciation and amortization	—				—				263				365				—				628
General, administrative and other	—				—				357				147				(13		)		491
	—				—				620				4,623				(105		)		5,138
Other expenses from managed and franchised properties	—				—				4,081				571				(961		)		3,691
Total expenses	—				—				4,701				5,194				(1,066		)		8,829
Operating income	—				—				515				1,158				—				1,673
Interest income	—				—				7				3				—				10
Interest expense	—				(334		)		(59		)		(225		)		—				(618		)
Equity in earnings from unconsolidated affiliates	—				—				5				14				—				19
Gain (loss) on foreign currency transactions	—				—				443				(417		)		—				26
Other gain, net	—				—				2				35				—				37
Income (loss) before income taxes and equity in earnings from subsidiaries	—				(334		)		913				568				—				1,147
Income tax benefit (expense)	(5		)		128				(340		)		(248		)		—				(465		)
Income (loss) before equity in earnings from subsidiaries	(5		)		(206		)		573				320				—				682
Equity in earnings from subsidiaries	678				884				311				—				(1,873		)		—
Net income	673				678				884				320				(1,873		)		682
Net income attributable to noncontrolling interests	—				—				—				(9		)		—				(9		)
Net income attributable to Hilton stockholders	$	673			$	678			$	884			$	311			$	(1,873	)		$	673
Comprehensive income	$	315			$	669			$	813			$	47			$	(1,515	)		$	329
Comprehensive income attributable to noncontrolling interests	—				—				—				(14		)		—				(14		)
Comprehensive income attributable to Hilton stockholders	$	315			$	669			$	813			$	33			$	(1,515	)		$	315

	Year Ended December 31, 2016
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Operating Activities:
Net cash provided by (used in) operating activities	$	—			$	(37	)		$	897			$	1,095			$	(605	)		$	1,350
Investing Activities:
Capital expenditures for property and equipment	—				—				(9		)		(308		)		—				(317		)
Issuance of intercompany receivables	—				—				(192		)		(42		)		234				—
Payments received on intercompany receivables	—				—				192				—				(192		)		—
Proceeds from asset dispositions	—				—				—				11				—				11
Contract acquisition costs	—				—				(46		)		(9		)		—				(55		)
Capitalized software costs	—				—				(73		)		(8		)		—				(81		)
Other	—				(6		)		(35		)		5				—				(36		)
Net cash used in investing activities	—				(6		)		(163		)		(351		)		42				(478		)
Financing Activities:
Borrowings	—				—				1,000				3,715				—				4,715
Repayment of debt	—				(266		)		—				(4,093		)		—				(4,359		)
Intercompany borrowings	—				—				42				192				(234		)		—
Debt issuance costs	—				(17		)		(20		)		(39		)		—				(76		)
Repayment of intercompany borrowings	—				—				—				(192		)		192				—
Intercompany transfers	277				326				(1,744		)		1,141				—				—
Dividends paid	(277		)		—				—				—				—				(277		)
Intercompany dividends	—				—				—				(605		)		605				—
Distributions to noncontrolling interests	—				—				—				(32		)		—				(32		)
Net cash provided by (used in) financing activities	—				43				(722		)		87				563				(29		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	—				—				—				(15		)		—				(15		)
Net increase in cash, restricted cash and cash equivalents	—				—				12				816				—				828
Cash, restricted cash and cash equivalents, beginning of period	—				—				109				747				—				856
Cash, restricted cash and cash equivalents, end of period	$	—			$	—			$	121			$	1,563			$	—			$	1,684

	Year Ended December 31, 2015
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Operating Activities:
Net cash provided by operating activities	$	—			$	184			$	936			$	723			$	(436	)		$	1,407
Investing Activities:
Capital expenditures for property and equipment	—				—				(11		)		(299		)		—				(310		)
Acquisitions, net of cash acquired	—				—				—				(1,402		)		—				(1,402		)
Proceeds from asset dispositions	—				—				—				2,205				—				2,205
Contract acquisition costs	—				—				(23		)		(14		)		—				(37		)
Software capitalization costs	—				—				(57		)		(5		)		—				(62		)
Other	—				—				13				7				—				20
Net cash provided by (used in) investing activities	—				—				(78		)		492				—				414
Financing Activities:
Borrowings	—				—				—				48				—				48
Repayment of debt	—				(775		)		—				(849		)		—				(1,624		)
Intercompany transfers	138				591				(693		)		(36		)		—				—
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		)		(869		)		(1,097		)		436				(1,714		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	—				—				—				(19		)		—				(19		)
Net increase (decrease) in cash, restricted cash and cash equivalents	—				—				(11		)		99				—				88
Cash, restricted cash and cash equivalents, beginning of period	—				—				120				648				—				768
Cash, restricted cash and cash equivalents, end of period	$	—			$	—			$	109			$	747			$	—			$	856

	Year Ended December 31, 2014
	Parent				Subsidiary Issuers				Guarantors				Non-Guarantors				Eliminations				Total
	(in millions)
Operating Activities:
Net cash provided by operating activities	$	—			$	—			$	1,085			$	522			$	(300	)		$	1,307
Investing Activities:
Capital expenditures for property and equipment	—				—				(5		)		(263		)		—				(268		)
Proceeds from asset dispositions	—				—				4				40				—				44
Contract acquisition costs	—				—				(19		)		(46		)		—				(65		)
Software capitalization costs	—				—				(64		)		(5		)		—				(69		)
Other	—				—				11				37				—				48
Net cash used in investing activities	—				—				(73		)		(237		)		—				(310		)
Financing Activities:
Borrowings	—				—				—				350				—				350
Repayment of debt	—				(1,000		)		—				(424		)		—				(1,424		)
Debt issuance costs	—				(6		)		—				(3		)		—				(9		)
Capital contribution	—				—				—				22				(9		)		13
Intercompany transfers	—				1,006				(1,094		)		88				—				—
Intercompany dividends	—				—				—				(309		)		309				—
Distributions to noncontrolling interests	—				—				—				(5		)		—				(5		)
Net cash used in financing activities	—				—				(1,094		)		(281		)		300				(1,075		)
Effect of exchange rate changes on cash, restricted cash and cash equivalents	—				—				—				(14		)		—				(14		)
Net decrease in cash, restricted cash and cash equivalents	—				—				(82		)		(10		)		—				(92		)
Cash, restricted cash and cash equivalents, beginning of period	—				—				202				658				—				860
Cash, restricted cash and cash equivalents, end of period	$	—			$	—			$	120			$	648			$	—			$	768

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.

	2016
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Year
	(in millions, except per share data)
Revenues	$	2,750			$	3,051			$	2,942			$	2,920			$	11,663
Operating income	409				553				493				406				1,861
Net income (loss)	310				244				192				(382		)		364
Net income (loss) attributable to Hilton stockholders	309				239				187				(387		)		348
Basic earnings (loss) per share(1)	$	0.94			$	0.73			$	0.57			$	(1.18	)		$	1.06
Diluted earnings (loss) per share(1)	$	0.94			$	0.72			$	0.57			$	(1.17	)		$	1.05

	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 earnings per share(1)	$	0.46			$	0.49			$	0.85			$	2.47			$	4.27
Diluted earnings per share(1)	$	0.46			$	0.49			$	0.85			$	2.47			$	4.26

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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. All per share amounts have been adjusted to reflect the Reverse Stock Split. See Note 1: "Organization" for further discussion.

Note 29: Subsequent Events

Spin-offs

On January 3, 2017, we completed the previously announced spin-offs of a portfolio of hotels and resorts, as well as our timeshare business, into two independent, publicly traded companies: Park Hotels & Resorts Inc. and Hilton Grand Vacations Inc., respectively. The spin-offs were completed via a distribution to each of Hilton's stockholders of record, as of close of business on December 15, 2016, of 100 percent of the outstanding common stock of Park and HGV. Each Hilton stockholder received one share of Park common stock for every five shares of Hilton common stock and one share of HGV common stock for every 10 shares of Hilton common stock. Both Park and HGV have their common stock listed on the New York Stock Exchange under the symbols "PK" and "HGV," respectively.

Following the spin-offs, Hilton did not retain any ownership interest in Park or HGV; however, we entered into certain agreements that provide a framework for our relationship with them, including a Transition Services Agreement, an Employee Matters Agreement and a Tax Matters Agreement with Park and HGV, as well as Management and Franchise Agreements with Park and a License Agreement with HGV. Beginning in the first quarter of 2017, commensurate with the completion of the spin-offs, the historical financial results of Park and HGV will be reflected in our condensed consolidated financial statements as discontinued operations.