INVENTORY

Inventory, totaling $11 million as of year-end 2011, primarily consists of hotel operating supplies for the limited number of properties we own or lease. Inventory totaling $1,489 million as of year-end 2010, consisted primarily of Timeshare segment interval, fractional ownership, and residential products totaling $1,472 million and hotel operating supplies of $17 million. Interest capitalized as a cost of Timeshare segment interval, fractional ownership, and residential products totaled $6 million in 2011 and $3 million in 2010. On November 21, 2011, we transferred all Timeshare segment inventory balances (including the capitalized interest) to MVW as part of the spin-off. See Footnote No. 17, "Spin-off" for additional information.

We generally value operating supplies at the lower of cost (using the first-in, first-out method) or market. Prior to the spin-off date, we primarily recorded Timeshare segment interval, fractional ownership, and residential products at the lower of cost or fair market value, in accordance with applicable accounting guidance. Consistent with recognized industry practice, we classified Timeshare segment interval, fractional ownership, and residential products inventory as of year-end 2010 (which had an operating cycle that exceeds 12 months) as a current asset.

Prior to the spin-off, in preparing our former Timeshare segment to operate as an independent, publicly traded company (see Footnote No. 17, "Spin-off" for additional information), management assessed the Timeshare segment's intended use of excess undeveloped land and built inventory and the current market conditions for those assets. On September 8, 2011, management approved a plan for the Timeshare segment to accelerate cash flow through the monetization of certain excess undeveloped land and to offer incentives to accelerate sales of excess built luxury fractional and residential inventory. As the fair values of the undeveloped land and the excess built luxury fractional and residential inventory were less than their respective carrying values, we recorded an inventory impairment charge in 2011 of $256 million to adjust the carrying value of the inventory to its fair value. Additionally, upon the approval of the plan in 2011, we reclassified $57 million of this undeveloped land previously in our development plans from inventory to property and equipment. See Footnote No. 18, “Timeshare Strategy-Impairment Charges,” for additional information.

We show the composition of our former Timeshare segment inventory balances as of year-end 2010 in the following table:



($ in millions)	At Year-End 2010
Finished goods	$	732
Work-in-process	101
Land and infrastructure	639
	$	1,472