10.	Fair Value Measurements

The following tables detail the fair value of our financial assets and liabilities that are required to be measured at fair value on a recurring basis, as well as non-recurring fair value measurements, at September 30, 2013 and December 31, 2012, respectively (in millions):

				Fair Value at Measurement Date Using
	Balance at September 30, 2013			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Fair Value Measurements on a Recurring Basis:
Assets
Interest rate swap derivatives (a)	$	3		$	––	$	3		$	––
Forward currency sale contracts (a)		3			––		3			––
Liabilities
Interest rate swap derivatives (a)		(4	)		––		(4	)		––
Forward currency sale contracts (a)		(3	)		––		(3	)		––

				Fair Value at Measurement Date Using
	Balance at December 31, 2012			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)

Fair Value Measurements on a Recurring Basis:
Assets
Interest rate swap derivatives (a)	$	7		$	––	$	7		$	––
Forward currency sale contract (a)		5			––		5			––
Liabilities
Interest rate swap derivatives (a)		(6	)		––		(6	)		––

Fair Value Measurements on a Non-recurring Basis:
Impaired hotel properties held and used (b)		34			––		––			34

(a) These derivative contracts have been designated as hedging instruments.

(b) The fair value measurements are as of the measurement date of the impairment and may not reflect subsequent book values.

Derivatives and Hedging

Interest rate swap derivatives designated as cash flow hedges. We have designated our floating-to-fixed interest rate swap derivatives as cash flow hedges. The purpose of the interest rate swaps is to hedge against changes in cash flows (interest payments) attributable to fluctuations in variable rate debt. The derivatives are valued based on the prevailing market yield curve on the date of measurement. We also evaluate counterparty credit risk when we calculate the fair value of the swaps. Changes in the fair value of the derivatives are recorded to accumulated other comprehensive income (loss) within the equity portion of our balance sheets. The hedges were fully effective as of September 30, 2013.

The following table summarizes our interest rate swap derivatives designated as cash flow hedges (in millions):

								Change in Fair Value
Transaction Date	Total Notional Amount		Maturity Date	Swapped Index	All-in Rate			Gain (Loss) Quarter ended							Gain (Loss) Year-to-date ended
								September 30, 2013			September 7, 2012			September 30, 2013			September 7, 2012
November 2011 (1)	A$	62	November 2016	Reuters BBSY		6.7	%		$	––		$	––		$	1		$	––
February 2011 (2)	NZ$	79	February 2016	NZ$ Bank Bill		7.15	%		$	––		$	––		$	1		$	(2	)

(1) The swap was entered into in connection with the A$82 million ($85 million) mortgage loan on the Hilton Melbourne South Wharf.

(2) The swap was entered into in connection with the NZ$105 million ($87 million) mortgage loan on seven properties in New Zealand.

Interest rate swap derivatives designated as fair value hedges. We have designated our fixed-to-floating interest rate swap derivatives as fair value hedges. We enter into these derivative instruments to hedge changes in the fair value of fixed-rate debt that occur as a result of changes in market interest rates. The derivatives are valued based on the prevailing market yield curve on the date of measurement. We also evaluate counterparty credit risk in the calculation of the fair value of the swaps. The changes in the fair value of the derivatives largely are offset by corresponding changes in the fair value of the underlying debt due to changes in the 3-month LIBOR rate, which change is recorded as an adjustment to the carrying amount of the debt. Any difference between the change in the fair value of the swap and the change in the fair value of the underlying debt, which difference was not significant for the periods presented, is considered the ineffective portion of the hedging relationship and is recognized in net income (loss).

We have three fixed-to-floating interest rate swap agreements for an aggregate notional amount totaling $300 million. During both the quarters ended September 30, 2013 and September 7, 2012, the fair value of the swaps decreased $1 million. During the year-to-date periods ended September 30, 2013 and September 7, 2012, the fair value of the swaps decreased $4 million and $2 million, respectively.

Foreign Investment Hedging Instruments. We have five foreign currency forward sale contracts that hedge a portion of the foreign currency exposure resulting from the eventual repatriation of our net investment in foreign operations. These derivatives are considered hedges of the foreign currency exposure of a net investment in a foreign operation and are marked-to-market with changes in fair value recorded to accumulated other comprehensive income (loss) within the equity portion of our balance sheets. The forward sale contracts are valued based on the forward yield curve of the foreign currency to U.S. dollar forward exchange rate on the date of measurement. We also evaluate counterparty credit risk when we calculate the fair value of the derivatives.

The following table summarizes our foreign currency sale contracts (in millions):

Currently Outstanding						Change in Fair Value – All Contracts
Transaction Date Range	Total Transaction Amount in Foreign Currency		Total Transaction Amount in Dollars		Forward Purchase Date Range	Gain (Loss) Quarter ended						Gain (Loss) Year-to-date ended
						September 30, 2013			September 7, 2012			September 30, 2013				September 7, 2012
May 2008-January 2013	€	120	$	163	May 2014 - January 2016	$	(6	)	$	(2	)	$	(2	)	$		1

In addition to the forward sale contracts, we have designated a portion of the foreign currency draws on our credit facility as hedges of net investments in foreign operations. Changes in fair value in the designated credit facility draws are recorded to accumulated other comprehensive income (loss) within the equity portion of our balance sheets.

The following table summarizes the draws on our credit facility that are designated as hedges of net investments in international operations (in millions):

Currency	Balance Outstanding US$		Balance Outstanding in Foreign Currency		Gain (Loss) Quarter ended								Gain (Loss) Year-to-date ended
					September 30, 2013				September 7, 2012				September 30, 2013				September 7, 2012
Canadian dollars (1)	$	30	C$	31	$	(1	)	$		––		$		1		$		––
Australian dollars	$	6	A$	7	$	––		$		––		$		1		$		––
Euros	$	100	€	74	$	(3	)	$		(1	)	$		(3	)	$		(1	)

(1) We have an additional $74 million outstanding on the credit facility in Canadian dollars that has not been designated as a hedging instrument.

Other Liabilities

Fair Value of Other Financial Liabilities. We did not elect the fair value measurement option for any of our other financial liabilities. Valuations for secured debt and our credit facility are determined based on the expected future payments discounted at risk-adjusted rates. Senior Notes and the Exchangeable Senior Debentures are valued based on quoted market prices. The fair values of financial instruments not included in this table are estimated to be equal to their carrying amounts.

The fair value of certain financial liabilities are shown below (in millions):

	September 30, 2013					December 31, 2012
	Carrying Amount		Fair Value			Carrying Amount			Fair Value
Financial liabilities
Senior notes (Level 1)	$	2,647	$	2,758	$		3,038	$		3,296
Exchangeable Senior Debentures (Level 1)		367		562			531			725
Credit facility (Level 2)		729		729			763			763
Mortgage debt and other, net of capital leases (Level 2)		816		831			1,078			1,094