Carnival Cruises 2011 Annual Report Download - page 27

We believe the estimated fair value for each of our cruise brands that carry goodwill significantly exceeds the
carrying value of their allocated net assets, except for Ibero. At July 31, 2011, Ibero’s estimated fair value only
exceeded its carrying value by 2%, or $12 million, therefore, minor changes to these assumptions would lead to
an Ibero impairment.
Given the continuing weakness of the Spanish economy and its impact on the vacation industry, it is possible that
Ibero’s goodwill, which was $154 million at November 30, 2011, could become impaired in the future if the
Spanish vacation industry does not recover enough to enable Ibero to increase its cruise pricing. The
recoverability of Ibero’s goodwill is not without doubt because it is difficult to predict the timing of the
resurgence of the Spanish economy and its vacation industry.
The reconciliation of the changes in the carrying amounts of our intangible assets not subject to amortization,
which represent trademarks that have been allocated to our North America and EAA cruise brands, was as
follows (in millions):
North America
Cruise Brands
EAA
Cruise Brands Total
Balance at November 30, 2009 .................................. $927 $409 $1,336
Foreign currency translation adjustment ........................... - (25) (25)
Balance at November 30, 2010 .................................. 927 384 $1,311
Foreign currency translation adjustment ........................... - 2 2
Balance at November 30, 2011 .................................. $927 $386 $1,313
As of July 31, 2011, we also performed our annual trademark impairment reviews by comparing the estimated
fair values of our trademarks to their carrying values. The cruise brands that have trademarks recorded are AIDA,
Ibero, P&O Cruises (Australia), P&O Cruises (UK) and Princess. We believe the estimated fair value for each of
our recorded trademarks significantly exceeds its respective carrying value and, therefore, none of our
trademarks were impaired. We estimated fair values based upon a discounted future cash flow analysis, which
estimated the amount of royalties that we are relieved from having to pay for use of the associated trademarks,
based upon forecasted cruise revenues and royalty rates that a market participant would use. The royalty rates are
estimated primarily using comparable royalty agreements for similar industries.
The determination of our cruise brand and trademark fair values includes numerous assumptions that are subject
to various risks and uncertainties. We believe that we have made reasonable estimates and judgments in
determining whether our goodwill and trademarks have been impaired. However, if there is a material change in
assumptions used in our determination of fair values or if there is a material change in the conditions or
circumstances influencing fair values, then we may need to recognize a material impairment charge.
There have not been any events or circumstances subsequent to July 31, 2011, which we believe would require us
to perform interim goodwill or trademark impairment reviews.
At November 30, 2011 and 2010, our intangible assets subject to amortization are immaterial to our consolidated
financial statements.
Derivative Instruments and Hedging Activities
We utilize derivative and nonderivative financial instruments, such as foreign currency forwards, options and
swaps, foreign currency debt obligations and foreign currency cash balances, to manage our exposure to
fluctuations in certain foreign currency exchange rates, and interest rate swaps to manage our interest rate
exposure in order to achieve a desired proportion of fixed and floating rate debt. In November 2011, we
implemented a fuel derivatives program to mitigate a portion of the risk to our future cash flows attributable to
potentially significant fuel price increases, which we define as our “economic risk.” Our policy is to not use any
financial instruments for trading or other speculative purposes.
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