Carnival Cruises 2011 Annual Report Download - page 44

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 and establish a reserve 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 U.S. generally accepted
accounting principles (“U.S. GAAP”). Such accruals and reserves are typically based on developments to date,
management’s estimates of the outcomes of these matters, our experience in contesting, litigating and settling
other similar non-income tax matters, historical claims experience, actuarially determined assumptions of
liabilities and any related insurance coverages. See “Note 7 - Contingencies,” “Note 8 - Income and Other Taxes”
and “Note 10 - Fair Value Measurements, Derivative Instruments and Hedging Activities” in the accompanying
consolidated 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 asset or 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 substantially all of our cruise revenues from the following:
– sales of passenger cruise tickets and, in some cases, the sale of air and other transportation to and from our
ships and cancellation fees. The cruise ticket price includes accommodation, most meals, some
non-alcoholic beverages, most onboard entertainment and many onboard activities. We also collect
governmental fees and taxes from our guests, and
– sales of goods and services primarily onboard our ships not included in the cruise ticket price including,
among other things, bar and some beverage sales, shore excursions, casino gaming, gift shop sales, photo
sales, spa services, internet and phone services and cruise vacation protection programs. These goods and
services are provided either directly by us or by independent concessionaires, from which we receive either
a percentage of their revenues or a fee.
We incur cruise operating costs and expenses for the following:
– the costs of passenger cruise bookings, which represent costs that are directly associated with passenger
cruise ticket revenues, and include travel agent commissions, air and other transportation related costs,
governmental fees and taxes that vary with guest head counts and related credit card fees,
– onboard and other cruise costs, which represent costs that are directly associated with onboard and other
revenues, and include among other things, the costs of liquor and some non-alcoholic beverages, costs of
tangible goods sold by us from our gift shop and photo sales, communication costs, costs of pre and post-
cruise land packages and related credit card fees. Concession revenues do not have significant associated
expenses because the costs and services incurred for concession revenues are borne by our concessionaires,
– payroll and related costs, which represent all costs related to our shipboard personnel, including deck and
engine crew, including officers, and hotel and administrative employees,
– fuel costs, which include fuel delivery costs,
– food costs, which include both our guest and crew food costs, and
– other ship operating costs, which include port costs that do not vary with guest head counts, repairs and
maintenance, including minor improvements and dry-dock expenses, hotel supplies, entertainment, freight
and logistics and all other ship operating costs and expenses.
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