Carnival Cruises 2012 Annual Report Download - page 89

Table of Contents
At July 31, 2012, all of our cruise brands carried goodwill, except for Ibero and Seabourn. We performed our annual impairment test as of July 31, 2012,
which included performing a qualitative assessment for all cruise brands that carried goodwill, except for Costa. Qualitative factors such as industry and
market conditions, macroeconomic conditions, changes to the weighted-average cost of capital (“WACC”), overall financial performance and changes in fuel
were considered in the qualitative assessment to determine how changes in these factors would affect each of these cruise brands’ estimated fair values. Based
on our qualitative assessments, we determined it was more-likely-than-not that each of these cruise brands’ estimated fair values exceeded their carrying values
and, therefore, we did not proceed to the two-step quantitative goodwill impairment test.
As of July 31, 2012, we also performed our annual goodwill impairment test of Costa’s goodwill. We did not perform a qualitative assessment but instead
proceeded directly to step one of the two-step goodwill impairment test and compared Costa’s estimated fair value to the carrying value of its allocated net
assets. Costa’s estimated cruise brand fair value was based on a discounted future cash flow analysis. The principal assumptions used in our cash flow
analysis related to forecasting future operating results, include net revenue yields, net cruise costs including fuel prices, capacity changes, including the
expected deployment of vessels into, or out of, Costa, WACC for comparable publicly-traded companies, adjusted for the risk attributable to the geographic
regions in which Costa operates and terminal values, which are all considered level 3 inputs. Based on the discounted cash flow analysis, we determined that
Costa’s estimated fair value significantly exceeded its carrying value and, therefore, we did not proceed to step two of the impairment test.
The reconciliation of the changes in the carrying amounts of our intangible assets not subject to amortization, which represent trademarks that have been
allocated to our North America and EAA cruise brands, was as follows (in millions):
North America
Cruise Brands
EAA
Cruise Brands Total
Balance at November 30, 2010 $927 $384 $1,311
Foreign currency translation adjustment - 2 2
Balance at November 30, 2011 927 386 1,313
Ibero trademarks impairment charge (a) - (20) (20)
Foreign currency translation adjustment - 6 6
Balance at November 30, 2012 $927 $372 $1,299
(a) At February 29, 2012, we also performed an interim impairment test of Ibero’s trademarks, which resulted in a $20 million impairment charge, based
on the reduction of revenues primarily as a result of slower than anticipated Ibero capacity growth and a lower estimated royalty rate, which are all
considered level 3 inputs. At November 30, 2012, Ibero’s remaining trademark carrying values are not significant.
At July 31, 2012, our cruise brands that have significant trademarks recorded include AIDA, P&O Cruises (Australia), P&O Cruises (UK) and
Princess. We performed our annual trademark impairment reviews for these cruise brands as of July 31, 2012, which included performing a qualitative
assessment. Qualitative factors such as industry and market conditions, macroeconomic conditions, changes to the WACC, changes to the royalty rates and
overall financial performance were considered in the qualitative assessment to determine how changes in these factors would affect the estimated fair values for
each of our cruise brands’ recorded trademarks. Based on our qualitative assessments, we determined it was more likely-than-not that the estimated fair value
for each of these cruise brands’ recorded trademarks exceeded their carrying value, and therefore, none of these trademarks were impaired.
The determination of our cruise brand and trademark fair values includes numerous assumptions that are subject to various risks and uncertainties. We
believe that we have made reasonable estimates and judgments in determining whether our goodwill and trademarks have been impaired. However, if there is a
material change in assumptions used or if there is a material change in the conditions or circumstances influencing fair values, then we may need to recognize
a material impairment charge.
There have not been any events or circumstances subsequent to July 31, 2012, which we believe would require us to perform an interim goodwill or trademark
impairment test.
At November 30, 2012 and 2011, our intangible assets subject to amortization are not significant to our consolidated financial statements.
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