Carnival Cruises 2008 Annual Report Download - page 78

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F-19
2008 2007
Carrying Carrying
Value Fair Value Value Fair Value
Financial Instruments
Cash equivalents(a) $ 65 $ 65 $ 360 $ 360
Long-term other assets(b) $ 507 $ 491 $ 385 $ 378
Debt–non-convertible(c) $8,477 $6,591 $7,456 $7,407
Debt-convertible(d) $ 866 $ 754 $1,396 $1,601
(a) Cash equivalents are comprised of certificates of deposit and due to their short
maturities the carrying amounts approximate their fair values.
(b) At November 30, 2008 and 2007, long-term other assets includes Treasury Strips, and
notes and other receivables. The fair values of Treasury Strips were based on public
market prices. The fair values of notes and other receivables were based on estimated
discounted future cash flows.
(c) The net difference between the fair value of our non-convertible debt and its carrying
value was due primarily to the market interest rates in existence at the respective
measurement dates being higher or lower than the rates on our debt obligations. The fair
values of our publicly-traded notes were based on their market prices. The fair values
of our other debt were estimated based on appropriate market interest rates being applied
to this debt.
(d) The net difference between the fair value of our publicly-traded convertible notes and
their carrying value is largely due to the impact of lower interest rates in 2008 and
changes in the Carnival Corporation common stock price on the value of our convertible
notes in 2007. The fair values of our publicly-traded convertible notes were based on
their market prices.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS No.
157"). SFAS No. 157 defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. In addition, the standard outlines a valuation framework and creates a
fair value hierarchy in order to increase the consistency and comparability of fair value
measurements and the related disclosures. The adoption of SFAS No. 157 did not materially
impact our financial statements.
At November 30, 2008, the fair value and basis of valuation of our financial assets and
financial liabilities that are required to be measured at fair value on a recurring basis
were as follows (in millions):
Fair Value Measurements
on a Recurring Basis
Financial Instruments Level 1(a) Level 2(b)
Cash equivalents(c) $ 305
Marketable securities held in rabbi trusts(d) $ 92 $ 21
Derivatives(e):
Ship foreign currency forwards and options(f) $ (20)
Net investment hedges(g) $ 13
Debt related currency swaps(h) $ 104
Interest rate swaps(i) $ 5
(a) Level 1 measurements are based on inputs from quoted prices for identical assets in
active markets.
(b) Level 2 measurements are based on inputs from quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active and inputs other than quoted prices that are
observable for the asset or liability.
(c) Cash equivalents are comprised of money market funds.
(d) Marketable securities held in rabbi trusts are comprised of mutual funds invested in
common stocks, bonds and other investments.
(e) Derivatives are included in prepaid expenses and other, long-term other assets, other
current liabilities and long-term other liabilities and marketable securities are
included in long-term other assets.
(f) At November 30, 2008, we have foreign currency forwards and options that are designated
as foreign currency cash flow hedges for two of our euro-denominated shipbuilding
contracts. These foreign currency forwards mature in 2009 and the options mature through
2010.