Carnival Cruises 2014 Annual Report Download - page 31

Valuation of Goodwill and Other Intangibles
The reconciliation of the changes in the carrying amounts of our goodwill, which goodwill has 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, 2012 ............................... $1,898 $1,276 $3,174
Foreign currency translation adjustment ........................ - 36 36
Balance at November 30, 2013 ............................... 1,898 1,312 3,210
Foreign currency translation adjustment ........................ - (83) (83)
Balance at November 30, 2014 ............................... $1,898 $1,229 $3,127
At July 31, 2014, all of our cruise brands carried goodwill, except for Ibero and Seabourn. As of that date, we
performed our annual goodwill impairment reviews, which included performing a qualitative assessment for all
cruise brands that carried goodwill, except for Carnival Cruise Line, Cunard and P&O Cruises (UK). Qualitative
factors such as industry and market conditions, macroeconomic conditions, changes to the weighted-average cost
of capital (“WACC”), overall financial performance, changes in fuel prices and capital expenditures 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 reviews.
As of July 31, 2014, we also performed our annual goodwill impairment reviews of Carnival Cruise Line’s,
Cunard’s and P&O Cruises (UK)’s goodwill. We did not perform a qualitative assessment but instead proceeded
directly to step one of the two-step quantitative goodwill impairment review and compared each of Carnival
Cruise Line’s, Cunard’s and P&O Cruises (UK)’s estimated fair value to the carrying value of their allocated net
assets. Their estimated cruise brand fair value was based on a discounted future cash flow analysis. The principal
assumptions used in our cash flow analyses consisted of forecasted future operating results, including net revenue
yields and net cruise costs including fuel prices; capacity changes, including the expected rotation of vessels into,
or out of, Carnival Cruise Line, Cunard and P&O Cruises (UK); capital expenditures; WACC of market
participants, adjusted for the risk attributable to the geographic regions in which Carnival Cruise Line, Cunard
and P&O Cruises (UK) operate and terminal values, which are all considered Level 3 inputs. Based on the
discounted cash flow analyses, we determined that each of Carnival Cruise Line’s, Cunard’s and P&O Cruises
(UK)’s estimated fair value significantly exceeded their carrying value and, therefore, we did not proceed to step
two of the impairment reviews.
At November 30, 2014, accumulated goodwill impairment charges were $153 million, which are all related to
Ibero and were recognized in 2012.
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, 2012 .................................. $927 $372 $1,299
Ibero trademarks impairment charge (a) ........................... - (13) (13)
Balance at November 30, 2013 .................................. 927 359 1,286
Foreign currency translation adjustment ........................... - (21) (21)
Balance at November 30, 2014 .................................. $927 $338 $1,265
(a) In 2013, we recognized a $13 million impairment charge to fully write-off Ibero’s trademarks’ carrying
value.
29