Carnival Cruises 2012 Annual Report Download - page 87

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Table of Contents
Accumulated other comprehensive loss was as follows (in millions):
November 30,
2012 2011
Cumulative foreign currency translation adjustments, net $ (98) $(123)
Unrecognized pension expenses (125) (96)
Unrealized loss on marketable security (13) (17)
Net gains on cash flow derivative hedges 29 27
$(207) $(209)
NOTE 11 – Fair Value Measurements, Derivative Instruments and Hedging Activities
Fair Value Measurements
U.S. accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3
measurement). This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of
inputs used to measure fair value are as follows:
• Level 1 measurements are based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Valuation
of these items does not entail a significant amount of judgment.
• Level 2 measurements are based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active or market data other than quoted prices that are observable for the assets or liabilities.
• Level 3 measurements are based on unobservable data that are supported by little or no market activity and are significant to the fair value of the assets or
liabilities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable
market participants at the measurement date. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those
that we believe market participants would use in pricing the asset or liability at the measurement date.
The fair value measurement of a financial asset or financial liability must reflect the nonperformance risk of the counterparty and us. Therefore, the impact of
our counterparty’s creditworthiness was considered when in an asset position, and our creditworthiness was considered when in a liability position in the fair
value measurement of our financial instruments. Creditworthiness did not have a significant impact on the fair values of our financial instruments at
November 30, 2012 and 2011. Both the counterparties and we are expected to continue to perform under the contractual terms of the instruments. Considerable
judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, certain estimates of fair values presented herein
are not necessarily indicative of the amounts that could be realized in a current or future market exchange.
Financial Instruments that are not Measured at Fair Value on a Recurring Basis
The estimated carrying and fair values and basis of valuation of our financial instrument assets and liabilities that are not measured at fair value on a
recurring basis were as follows (in millions):
November 30, 2012 November 30, 2011
Carrying
Value
Fair Value Carrying
Value
Fair Value
Level 1 Level 2 Level 1 Level 2
Assets
Cash and cash equivalents (a) $269 $269 $- $ 358 $ 358 $-
Long-term other assets (b) 39 1 36 42 2 39
Total $308 $270 $ 36 $400 $360 $ 39
Liabilities
Fixed rate debt (c) $5,195 $- $5,825 $6,251 $- $6,715
Floating rate debt (c) 3,707 - 3,706 3,102 - 3,057
Total $8,902 $- $9,531 $9,353 $- $9,772
(a) Cash and cash equivalents are comprised of cash on hand and time deposits and, due to their short maturities, the carrying values approximate their
fair values.
(b) At November 30, 2012 and 2011, substantially all of our long-term other assets were comprised of notes and other receivables. The fair values of notes
and other receivables were based on estimated future cash flows discounted at appropriate market interest rates.
F-17