Carnival Cruises 2008 Annual Report Download - page 90

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F-31
determination of fair value 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.
Our goodwill and trademarks have been assigned at an individual cruise brand level for
our goodwill and trademark impairment reviews, as each of our significant brands are
considered an operating segment. As of July 31 of each year, we review our goodwill and
trademarks for possible impairment. As of July 31, 2008, we determined that these intangible
assets were not impaired.
Since early November 2008, our stock market capitalization has generally been lower than
our shareholders' equity or book value. However, our brands have continued to generate
substantial cash flow from their operations, and we expect that they will continue to do so
in 2009 and in future years. Furthermore, given the relatively small difference between our
stock price and our book value per share, we believe that a reasonable potential buyer would
offer a control premium for our business franchise that would adequately cover the difference
between our trading prices and our book value. Accordingly, we do not believe there have
been any events or circumstances that would require us to perform interim goodwill and/or
trademark impairment reviews.
However, due to the ongoing uncertainty in market conditions, which may negatively
impact the performance of our reporting units, we will continue to monitor and evaluate the
carrying values of our goodwill and trademarks. If market and economic conditions or our
units' business performance deteriorates significantly, this could result in our performance
of interim impairment reviews prior to or after our July 31, 2009 annual impairment reviews.
Any such impairment reviews could result in recognition of a goodwill and/or trademark
impairment charge in 2009 or thereafter.
Contingencies
We periodically assess the potential liabilities related to any lawsuits or claims
brought against us, as well as for other known unasserted claims, including environmental,
legal, guest and crew, and tax matters. While it is typically very difficult to determine
the timing and ultimate outcome of these matters, we use our best judgment to determine if it
is probable, or more likely than not ("MLTN") for income tax matters, that we will incur an
expense related to the settlement or final adjudication of such matters and whether a
reasonable estimation of such probable or MLTN loss, if any, can be made. In assessing
probable losses, we make estimates of the amount of probable insurance recoveries, if any,
which are recorded as assets. We accrue a liability when we believe a loss is probable or
MLTN for income tax matters, and the amount of the loss can be reasonably estimated, in
accordance with the provisions of SFAS No. 5, "Accounting for Contingencies," as amended, or
FIN 48, as appropriate. Such accruals are typically based on developments to date,
management's estimates of the outcomes of these matters, our experience in contesting,
litigating and settling other non-income tax similar matters, historical claims experience
and actuarially determined assumptions of liabilities, and any related insurance coverage.
See Notes 7 and 8 in the accompanying financial statements for additional information
concerning our contingencies.
Given the inherent uncertainty related to the eventual outcome of these matters and
potential insurance recoveries, it is possible that all or some of these matters may be
resolved for amounts materially different from any provisions or disclosures that we may have
made with respect to their resolution. In addition, as new information becomes available, we
may need to reassess the amount of liability that needs to be accrued related to our
contingencies. All such revisions in our estimates could materially impact our results of
operations and financial position.
Results of Operations
We earn our cruise revenues primarily from the following:
• sales of passenger cruise tickets and, in some cases, the sale of air and other trans-
portation to and from our ships. The cruise ticket price includes accommodations, most
meals, some non-alcoholic beverages, entertainment and many onboard activities, and