Carnival Cruises 2009 Annual Report Download - page 41

amount of royalties avoided by our ownership of the trademark is based on forecasted cruise revenues and
estimated royalty rates based on comparable royalty agreements used in similar industries.
We believe that we have made reasonable estimates and judgments in determining whether our ships,
goodwill and trademarks have been impaired. However, if there is a material change in the assumptions used in
our determination of fair value, or if there is a material change in the conditions or circumstances influencing fair
value, we could be required to recognize a material impairment charge.
Contingencies
We periodically assess the potential liabilities related to any lawsuits or claims brought against us, as well as
for other known unasserted claims, including environmental, legal, guest and crew, and tax matters. While it is
typically very difficult to determine the timing and ultimate outcome of these matters, we use our best judgment
to determine if it is probable, or more likely than not (“MLTN”) for income tax matters, that we will incur an
expense related to the settlement or final adjudication of such matters and whether a reasonable estimation of
such probable or MLTN loss, if any, can be made. In assessing probable losses, we make estimates of the amount
of probable insurance recoveries, if any, which are recorded as assets. We accrue a liability when we believe a
loss is probable or MLTN for income tax matters, and the amount of the loss can be reasonably estimated in
accordance with U.S. generally accepted accounting principles. Such accruals are typically based on
developments to date, management’s estimates of the outcomes of these matters, our experience in contesting,
litigating and settling other non-income tax similar matters, historical claims experience and actuarially
determined assumptions of liabilities, and any related insurance coverages. See Notes 7 and 8 in the
accompanying consolidated financial statements for additional information concerning our contingencies.
Given the inherent uncertainty related to the eventual outcome of these matters and potential insurance
recoveries, it is possible that all or some of these matters may be resolved for amounts materially different from
any provisions or disclosures that we may have made with respect to their resolution. In addition, as new
information becomes available, we may need to reassess the amount of asset or liability that needs to be accrued
related to our contingencies. All such revisions in our estimates could materially impact our results of operations
and financial position.
Results of Operations
We earn our cruise revenues primarily from the following:
- sales of passenger cruise tickets and, in some cases, the sale of air and other transportation to and from
our ships. The cruise ticket price includes accommodation, most meals, some non-alcoholic beverages,
most onboard entertainment and many onboard activities, and
- sales of goods and services primarily onboard our ships not included in the cruise ticket price (which
include, among other things, bar and some beverage sales, shore excursions, casino gaming, gift shop,
photo and art sales, internet and spa services, and cellular phone and telephone usage) and pre and post-
cruise land packages. These goods and services are provided either directly by us or by independent
concessionaires, from which we receive a percentage of their revenues or a fee.
We incur cruise operating costs and expenses for the following:
- the costs of passenger cruise bookings, which represent costs that vary directly with passenger cruise
ticket revenues, and include travel agent commissions, air and other transportation related costs and
credit card fees,
- onboard and other cruise costs, which represent costs that vary directly with onboard and other
revenues, and include the costs of liquor and some beverages, costs of tangible goods sold by us from
our gift shop, photo and art sales activities, communication costs, costs of pre and post-cruise land
packages and credit card fees. Concession revenues do not have significant associated expenses
because the costs and services incurred for concession revenues are borne by our concessionaires,
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