Royal Caribbean Cruise Lines 2009 Annual Report Download - page 86

ROYAL CARIBBEAN CRUISES LTD.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 4. Intangible Assets
Intangible assets consist of the following (in thousands):
We performed the annual impairment review of our trademarks and trade names during the fourth quarter of 2009 using a
discounted cash flow model and the relief-from-royalty method. The royalty rate used is based on comparable royalty agreements in
the tourism and hospitality industry. We used the same discount rate used in valuing the Pullmantur reporting unit in our goodwill
impairment test. Based on the discounted cash flow model we determined the fair value of our trademarks and trade names exceeded
their carrying value. If there is a material change in the assumptions used in our determination of fair values 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. For
example, the Spanish economy has been harder impacted than most other economies around the world where we trade and there is
significant uncertainty as to whether or when it will recover. If that economy weakens more than contemplated in our discounted cash
flow model, that could trigger an impairment charge.
Finite-life intangible assets and related accumulated amortization are immaterial to our 2009, 2008, and 2007 consolidated
financial statements.
Note 5. Property and Equipment
Property and equipment consists of the following (in thousands):
Ships under construction include progress payments for the construction of new ships as well as planning, design, interest,
commitment fees and other associated costs. We capitalized interest costs of $41.1million, $44.4 million and $39.9 million for the
years 2009, 2008 and 2007, respectively.
We sold Oceanic for $14.5 million. The sale resulted in an immaterial gain.
Atlantic Star is currently not in operation. We have plans to sell the ship and therefore have classified the ship as held for sale in
2009. As a result, we transferred the net book value of $49.6 million to prepaid expenses and other assets within our consolidated
balance sheet. We recognized a charge of $7.0 million to reduce the carrying value of the ship to its fair value less cost to sell. This
amount is recorded within other operating expenses in our consolidated statements of operations.
Note 6. Other Assets and Other Liabilities
Variable Interest Entities
Authoritative guidance for consolidation addresses consolidation by business enterprises of Variable Interest Entities (“VIEs”),
which are entities in which the equity investors have not provided enough equity to finance its activities or the equity investors
(1) cannot directly or indirectly make decisions about the entity’s activities through their voting rights or similar rights; (2) do not
have the obligation to absorb the expected losses of the entity; (3) do not have the right to receive the expected residual returns of the
entity; or (4) have voting rights that are not proportionate to their economic interests and the entity’s activities involve or are
conducted on behalf of an investor with a disproportionately small voting interest.
F-13
2009 2008
Indefinite-life intangible asset – Pullmantur trademarks and trade names $235,610 $246,014
Foreign currency translation adjustment
5,953 (10,404)
Total $241,563 $235,610
2009 2008
Land $16,688 $16,288
Ships
18,101,001 16,214,832
Ships under construction 562,530 749,822
Other
880,188 862,129
19,560,407 17,843,071
Less
—
accumulated depreciation and amortization (4,292,354) (3,964,073)
$15,268,053 $13,878,998