Assets Held for Sale Valuation of Long-Lived Assets Investments Cash and Equivalents Loan Loss and Accounts Receivable Reserves Costs Incurred to Sell Real Estate Projects Accounts and Notes Receivable Reserves Interest Only Strips We periodically sell notes receivable originated by our timeshare business in connection with the sale of timeshare intervals. We retain servicing assets and interest in the assets transferred to special purpose entities which are accounted for as interest only strips. We treat the interest only strips as “Trading” or “Available for Sale” securities under the provisions of FAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” We report changes in the fair values of the interest only strips through the accompanying consolidated statement of Marriott International, Inc. 2001 Annual Report 27 Accounts Receivable Notes Receivable Reserve Reserve ($ in millions) January 1, 1999 $ 12 $ 4 Additions 16 5 Write-offs (6) (1) December 31, 1999 22 8 Additions 15 5 Write-offs (14) (1) December 29, 2000 23 12 Additions 27 48 Write-offs (11) (1) December 28, 2001 $ 39 $59 The following table summarizes the activity in our accounts and notes receivable reserves for the years ended December 31, 1999, December 29, 2000 and December 28, 2001: We capitalize direct costs incurred to sell real estate projects attrib- utable to and recoverable from the sales of timeshare interests until the sales are recognized. Costs eligible for capitalization follow the guidelines of FAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects.” Selling and marketing costs capitalized under this approach were approximately $126 million and $95 million at December 28, 2001 and December 29, 2000, respectively, and are included in other assets in the accompanying consolidated balance sheets. If a contract is canceled, we charge unrecoverable direct selling and marketing costs to expense, and record deposits forfeited as income. We measure loan impairment based on the present value of ex- pected future cash flows discounted at the loan’s original effective interest rate or the estimated fair value of the collateral. For im- paired 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 or the estimated fair value of the collateral. We apply our loan impairment policy individually to all loans in the portfolio and do not aggregate loans for the purpose of applying such policy. For loans that we have determined to be impaired, we recognize interest income on a cash basis. At December 28, 2001, our recorded investment in impaired loans was $110 million. Prior to the fourth quarter of 2001 our allowance for credit losses was $16 million. Following the charges recorded in the fourth quarter of 2001 (see the “Restructuring Costs and Other Charges” footnote) we have a $59 million allow- ance for credit losses, leaving $51 million of our investment in im- paired loans for which there is no related allowance for credit losses. We recognized no net interest income on these loans during 2001. We consolidate entities that we control due to holding a majority voting interest. We account for investments in joint ventures using the equity method of accounting when we exercise significant influ- ence over the venture. If we do not exercise significant influence, we account for the investment using the cost method of accounting. We account for investments in limited partnerships and limited liability companies using the equity method of accounting when we own more than a minimal investment. Summarized information relating to our unconsolidated affiliates is as follows: total assets, which pri- marily comprise hotel real estate managed by us, and total liabilities were approximately $4.3 billion and $3.1 billion at December 28, 2001, and $3.7 billion and $2.6 billion at December 29, 2000. Total sales and net loss were $1.5 billion and $39 million for the year ended December 28, 2001 and $765 million and $14 million for the year ended December 29, 2000. Total sales and net income were $518 million and $3 million for the year ended December 31, 1999. Our ownership interest in these unconsolidated affiliates varies, but is typically around 15 percent to 25 percent. We consider all highly liquid investments with a maturity of three months or less at date of purchase to be cash equivalents. Our liability for the Marriott Rewards program was  $631 million at December 28, 2001 and $554 million at December 29, 2000, of which $380 million and $310 million, respectively, are included in other long-term liabilities in the accompanying consolidated balance sheet. We consider properties to be assets held for sale when manage- ment approves and commits to a formal plan to actively market a property for sale or a signed sales contract exists. Upon desig- nation as an asset held for sale, we record the carrying value of each property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and we stop recording depreciation expense. Prior to January 1, 2000, we recognized the amounts we received in respect of the Marriott Rewards program from man- aged, owned and leased hotels as revenue together with an asso- ciated expense at the time the points were awarded. No revenues or expenses were recorded in respect of franchised hotels or program partners. The adoption of the change in accounting policy described above had the effect of increasing sales and expenses by $63 million in the year ended December 29, 2000. The adoption had no impact on net income, and we expect the ongoing impact to our financial statements to be immaterial. We review the carrying values of long-lived assets when events  or changes in circumstances indicate that the carrying amount  of an asset may not be recoverable. If we expect an asset to gen- erate cash flows less than the asset’s carrying value at the lowest level of identifiable cash flows, we recognize a loss for the differ- ence between the asset’s carrying amount and its fair value. as revenue the amounts previously deferred, and recognize the cor- responding expense relating to the cost of the awards redeemed.