Carnival Cruises 2011 Annual Report Download - page 12

Dry-dock costs primarily represent planned major maintenance activities that are incurred when a ship is taken
out-of-service for scheduled maintenance. These costs are expensed as incurred and included in other ship
operating expenses.
We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amounts of these assets may not be fully recoverable. Upon the occurrence of a triggering event, the
assessment of possible impairment is based on our ability to recover the carrying value of our asset based on our
estimate of its undiscounted future cash flows. If these estimated undiscounted future cash flows are less than the
carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s carrying
value over its estimated fair value.
Intangibles
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in
business acquisitions. We review our goodwill for impairment at least annually and, when events or
circumstances dictate, more frequently. All of our goodwill has been allocated to our reporting units, also
referred to as “cruise brands”. Our goodwill impairment reviews consist of a two-step process. The first step is to
determine the fair value of the cruise brand and compare it to the carrying value of the net assets allocated to the
cruise brand. If this fair value exceeds the carrying value no further analysis or goodwill write-down is required.
The second step is required if the fair value of the cruise brand is less than the carrying value of the net assets. In
this step the estimated fair value of the cruise brand is allocated to all the underlying assets and liabilities,
including both recognized and unrecognized tangible and intangible assets, based on their relative fair values. If
necessary, goodwill is then written-down to its implied fair value.
Trademarks represent substantially all of our other intangibles. For certain acquisitions, we have allocated a
portion of the purchase prices to the acquiree’s identified trademarks. Trademarks are estimated to have an
indefinite useful life and, therefore, are not amortizable, but are reviewed for impairment at least annually and,
when events or circumstances dictate, more frequently. Our trademarks would be considered impaired if their
carrying value exceeds their estimated fair value. The costs of developing and maintaining our trademarks are
expensed as incurred.
A significant amount of judgment is required in estimating the fair values of our cruise brands and trademarks.
Revenue and Expense Recognition
Guest cruise deposits represent unearned revenues and are initially recorded as customer deposit liabilities
generally when received. Customer deposits are subsequently recognized as cruise revenues, together with
revenues from onboard and other activities, and all associated direct costs and expenses of a voyage are
recognized as cruise costs and expenses, upon completion of voyages with durations of ten nights or less and on a
pro rata basis for voyages in excess of ten nights. The impact of recognizing these shorter duration cruise
revenues and costs and expenses on a completed voyage basis versus on a pro rata basis is not material. Future
travel discount vouchers issued to guests are recorded as a reduction of cruise passenger ticket revenues when
such vouchers are utilized. Cancellation fees are recognized in cruise passenger ticket revenues at the time of the
cancellation.
Our sale to guests of air and other transportation to and from our ships and the related cost of purchasing this
service are recorded in cruise passenger ticket revenues and cruise transportation costs, respectively. The
proceeds that we collect from the sale of third party shore excursions and on behalf of onboard concessionaires,
net of the amounts remitted to them, are recorded as concession revenues in onboard and other cruise revenues.
These amounts are recognized on a completed voyage or pro rata basis as discussed above.
Cruise passenger ticket revenues include fees and taxes levied by governmental authorities and collected by us
from our guests. A portion of these fees and taxes vary with guest head counts and are directly imposed on a
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