Carnival Cruises 2015 Annual Report Download - page 31

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changes in our credit ratings. At November 30, 2015 and 2014, the net difference between the fair value of
our floating rate debt and its carrying value was due to the market interest rates in existence at
November 30, 2015 and November 30, 2014 being slightly higher than the floating interest rates on these
debt obligations, including the impact of any changes in our credit ratings. The fair values of our publicly-
traded notes were based on their unadjusted quoted market prices in markets that are not sufficiently active
to be Level 1 and, accordingly, are considered Level 2. The fair values of our other debt were estimated
based on appropriate market interest rates being applied to this debt.
Financial Instruments that are Measured at Fair Value on a Recurring Basis
The estimated fair value and basis of valuation of our financial instrument assets and liabilities that are measured
at fair value on a recurring basis were as follows (in millions):
November 30, 2015 November 30, 2014
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets
Cash equivalents (a) ............................... $748 $ - $ - $ 91 $ - $ -
Restricted cash (b) ................................ 22 - - 19 - -
Marketable securities held in rabbi trusts (c) ............ 105 8 - 113 9 -
Derivative financial instruments (d) .................. - 29 - - 14 -
Long-term other asset (e) ........................... - - 21 - - 20
Total ......................................... $875 $ 37 $21 $223 $ 23 $20
Liabilities
Derivative financial instruments (d) .................. $ - $625 $ - $ - $278 $ -
Total ......................................... $ - $625 $ - $ - $278 $ -
(a) Cash equivalents are comprised of money market funds.
(b) The majority of restricted cash is comprised of money market funds.
(c) At November 30, 2015 and 2014, marketable securities held in rabbi trusts were comprised of Level 1
bonds, frequently-priced mutual funds invested in common stocks, and money market funds and Level 2
other investments. Their use is restricted to funding certain deferred compensation and non-qualified U.S.
pension plans.
(d) See “Derivative Instruments and Hedging Activities” section below for detailed information regarding our
derivative financial instruments.
(e) Long-term other asset is comprised of an auction-rate security. The fair value was based on a broker quote
in an inactive market, which is considered a Level 3 input. During 2015, there were no purchases or sales
pertaining to this auction-rate security and, accordingly, the change in its fair value was based solely on the
strengthening of the underlying credit.
We measure our derivatives using valuations that are calibrated to the initial trade prices. Subsequent valuations
are based on observable inputs and other variables included in the valuation models such as interest rate, yield
and commodity price curves, forward currency exchange rates, credit spreads, maturity dates, volatilities and
netting arrangements. We use the income approach to value derivatives for foreign currency options and
forwards, interest rate swaps and fuel derivatives using observable market data for all significant inputs and
standard valuation techniques to convert future amounts to a single present value amount, assuming that
participants are motivated, but not compelled to transact. We also corroborate our fair value estimates using
valuations provided by our counterparties.
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