Carnival Cruises 2012 Annual Report Download - page 78

Table of Contents
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.
In 2012, we also adopted new authoritative accounting guidance that allows us to first assess qualitative factors to determine whether it is necessary to perform
a more detailed quantitative trademark impairment test. We would perform the quantitative test if our qualitative assessment determined it was more-likely-
than-not that the trademarks are impaired. We may also elect to bypass the qualitative assessment and proceed directly to the quantitative test. 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 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 airports near the home ports of our ships and the related cost of purchasing these services 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. All 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 revenue-producing arrangement. This portion of the fees and taxes is expensed in
commissions, transportation and other costs when the corresponding revenues are recognized. These fees and taxes included in passenger ticket revenues and
commissions, transportation and other costs were $477 million, $405 million and $346 million in 2012, 2011 and 2010, respectively. The remaining portion
of governmental fees and taxes are also included in passenger ticket revenues but are expensed in other ship operating expenses when the corresponding
revenues are recognized.
Revenues and expenses from our hotel and transportation operations, which are included in our Tour and Other segment, are recognized at the time the services
are performed or expenses are incurred. Revenues from the leasing of two of our ships to an unaffiliated entity, which are also included in our Tour and Other
segment, are recognized ratably over the term of the charter agreement using the straight-line method.
Insurance
We maintain insurance to cover a number of risks including, among others, illness and injury to crew, guest injuries, pollution, damages to hull and
machinery for each of our ships, war risks, workers’ compensation, employee health, directors and officers liability, property damages and general liabilities
for third party claims. All of our insurance policies are subject to coverage limits, exclusions and deductible levels. The liabilities associated with crew
illnesses and crew and guest injury claims, including all legal costs, are estimated based on the specific merits of the individual claims or actuarially estimated
based on historical claims experience, loss development factors and other assumptions. While we believe our estimated accrued claims reserves are adequate,
the ultimate losses may differ.
Selling and Administrative Expenses
Selling expenses include a broad range of advertising, such as marketing and promotional expenses. Advertising is charged to expense as incurred, except for
media production costs. Media production costs are recorded as prepaid expenses and charged to expense upon the first airing of the advertisement. Advertising
expenses totaled $527 million in both 2012 and 2011 and $507 million in 2010. Administrative expenses represent the costs of our shoreside ship support,
reservations and other administrative functions, and include, among others, salaries and related benefits, professional fees and occupancy costs, which are
typically expensed as incurred.
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