Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Note 13: Fair Value Measurements

The carrying amounts and estimated fair values of our financial assets and liabilities were as follows:


	September 30, 2021
			Hierarchy Level
($ in millions)	Carrying Amount		Level 1		Level 3
Assets:
Timeshare financing receivables, net(1)	$	1,767			$	2,182
Liabilities:
Debt, net(2)		2,929		1,365		1,648
Non-recourse debt, net(2)		1,290		1,227		102


	December 31, 2020
			Hierarchy Level
($ in millions)	Carrying Amount		Level 1		Level 3
Assets:
Timeshare financing receivables, net(1)	$	974	$	—	$	1,248
Liabilities:
Debt, net(2)		1,159		315		871
Non-recourse debt, net(2)		766		—		732

(1) Carrying amount net of allowance for financing receivables losses.

(2) Carrying amount net of unamortized deferred financing costs and discount.

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. The table above excludes cash and cash equivalents, restricted cash, accounts receivable, accounts payable, advance deposits and accrued liabilities, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments.

The estimated fair values of our originated and acquired timeshare financing receivables were determined using a discounted cash flow model. Our model incorporates default rates, coupon rates, credit quality and loan terms respective to the portfolio based on current market assumptions for similar types of arrangements.

The estimated fair values of our Level 1 debt and non-recourse debt were based on prices in active debt markets. The estimated fair values of our Level 3 debt and non-recourse debt were based on the following:

•

Debt - based on indicative quotes obtained for similar issuances and projected future cash flows discounted at risk-adjusted rates.

•

Non-recourse debt - based on projected future cash flows discounted at risk-adjusted rates.

During the quarter ended September 30, 2021, we changed our estimate of fair value for certain non-recourse debt instruments from Level 3 to Level 1 due to availability of pricing for these instruments in active debt markets.

Non-recurring fair value measurements

Our assets that are measured at fair value on a non-recurring basis include land and infrastructure held for sale. These assets were measured to their estimated fair value as of December 31, 2020. We utilized the market approach for the land and cost approach for the infrastructure to determine their respective fair values. The fair value determinations involve judgement and are sensitive to key assumptions utilized, including comparative sales for land (level 2) and replacement costs for infrastructure (level 3). There has been no change to the estimated fair value of these assets for the nine months ended September 30, 2021.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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