Royal Caribbean Cruise Lines 2012 Annual Report Download - page 88

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
on certain markets. The Spanish economy was more
severely impacted than many other economies around
the world where we operate and there is significant
uncertainty as to when it will recover. In addition, the
impact of the Costa Concordia incident has had a
more lingering effect than expected and the impact
in future years is uncertain. Please refer to Note 3.
Goodwill for further information.
During the fourth quarter of 2012, we updated our
deferred tax asset recoverability analysis for projec-
tions included within the goodwill valuation model.
These projections, including the impact of recently
enacted laws regarding net operating loss utilization,
and the review of our tax planning strategies show
that it is no longer more-likely-than-not that we will
recover the deferred tax assets prior to their expi-
ration. As such, we have determined that a 100%
valuation allowance of our deferred tax assets was
required resulting in a deferred income tax expense of
$33.7 million. In addition, Pullmantur has a deferred
tax liability that was recorded at the time of acquisi-
tion. This liability represents the tax effect of the basis
difference between the tax and book values of the
trademarks and trade names that were acquired at
the time of the acquisition. Due to the impairment
charge related to these intangible assets, we reduced
the deferred tax liability by $5.2 million to $61.5 million.
The net $28.5 million impact of these adjustments
was recognized in earnings during the fourth quarter
of 2012 and is reported within Other (expense) income
in our statements of comprehensive income (loss).
Deferred tax assets, related valuation allowances and
deferred tax liabilities related to our operations are
not material as of December 31, 2012 and 2011.
NOTE 13. FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS
FAIR VALUE MEASUREMENTS
The estimated fair value of our financial instruments that are not measured at fair value on a recurring basis,
categorized based upon the fair value hierarchy, are as follows (in thousands):
Fair Value Measurements
at December 31, 2012 Using
Fair Value Measurements
at December 31, 2011 Using
Description Total Level 11Level 22Level 33Total Level 11Level 22Level 33
Assets:
Cash and cash equivalents4     — —      — —
Total Assets      — —      — —
Liabilities:
Long-term debt (including
 current portion of long-
term debt)5      —       —
Total Liabilities       —       —
() Inputs based on quoted prices (unadjusted) 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.
() Inputs other than quoted prices included within Level 1 that are observable for the liability, either directly or indirectly. For unsecured revolving
credit facilities and unsecured term loans, fair value is determined utilizing the income valuation approach. This valuation model takes into account
the contract terms of our debt such as the debt maturity and the interest rate on the debt. The valuation model also takes into account our credit-
worthiness based on publicly available credit default swap rates.
() Inputs that are unobservable. The Company did not use any Level 3 inputs as of December 31, 2012 and December 31, 2011.
() Consists of cash and marketable securities with original maturities of less than 90 days.
() Consists of unsecured revolving credit facilities, unsecured senior notes, senior debentures and unsecured term loans. Does not include our capital
lease obligations.