Carnival Cruises 2013 Annual Report Download - page 82

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Table of Contents
At July 31, 2013, our cruise brands that have significant trademarks recorded include AIDA, P&O Cruises (Australia), P&O Cruises (UK) and Princess. As
of that date, we performed our annual trademark impairment reviews for these cruise brands, which included performing a qualitative assessment. Qualitative
factors such as industry and market conditions, macroeconomic conditions, changes to the WACC, changes to the royalty rates and overall financial
performance were considered in the qualitative assessment to determine how changes in these factors would affect the estimated fair values for each of our
cruise brands’ recorded trademarks. Based on our qualitative assessments, we determined it was more-likely-than-not that the estimated fair value for each of
these cruise brands’ recorded trademarks exceeded their carrying value, and therefore, none of these trademarks were impaired.
In 2013, we also recognized a $14 million impairment charge related to an investment, leaving an insignificant carrying value at November 30, 2013.
At November 30, 2013 and 2012, our intangible assets subject to amortization are not significant to our consolidated financial statements.
The determination of our cruise brand, cruise ship 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, cruise ships and trademarks have been
impaired. However, if there is a change in assumptions used or if there is a change in the conditions or circumstances influencing fair values in the future,
then we may need to recognize an impairment charge.
There have not been any events or circumstances subsequent to July 31, 2013, which we believe would require us to perform an interim goodwill or trademark
impairment test.
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 addition, we utilize our fuel derivatives program to mitigate a
portion of the risk to our future cash flows attributable to potential 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.
All derivatives are recorded at fair value. The changes in fair value are recognized currently in earnings if the derivatives do not qualify as effective hedges, or
if we do not seek to qualify for hedge accounting treatment, such as for our fuel derivatives. If a derivative is designated as a fair value hedge, then changes in
the fair value of the derivative are offset against the changes in the fair value of the underlying hedged item. If a derivative is designated as a cash flow hedge,
then the effective portion of the changes in the fair value of the derivative is recognized as a component of AOCI until the underlying hedged item is recognized
in earnings or the forecasted transaction is no longer probable. If a derivative or a nonderivative financial instrument is designated as a hedge of our net
investment in a foreign operation, then changes in the fair value of the financial instrument are recognized as a component of AOCI to offset a portion of the
change in the translated value of the net investment being hedged, until the investment is sold or liquidated. We formally document hedging relationships for all
derivative and nonderivative hedges and the underlying hedged items, as well as our risk management objectives and strategies for undertaking the hedge
transactions.
We classify the fair values of all our derivative contracts as either current or long-term, depending on whether the maturity date of the derivative contract is
within or beyond one year from the balance sheet date. The cash flows from derivatives treated as hedges are classified in our Consolidated Statements of Cash
Flows in the same category as the item being hedged. Our cash flows related to fuel derivatives are classified within investing activities.
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