Royal Caribbean Cruise Lines 2003 Annual Report Download - page 27

ACCOUNTING PRONOUNCEMENTS
Goodwill represents the excess of cost over the fair value of
net assets acquired, and prior to January 1, 2002, it was amor-
tized over 40 years using the straight-line method. Upon adop-
tion of SFAS No. 142, “Goodwill and Other Intangible Assets”
on January 1, 2002, we ceased to amortize goodwill. Goodwill
amortization was $10.4 million in 2001. In addition, we were
required to perform an initial impairment review of our goodwill
upon adoption, annually thereafter and whenever events or
changes in circumstances indicate that the carrying amount of
these assets may not be fully recoverable. We completed our
initial and annual impairment tests and determined that goodwill
was not impaired. For the year ended December 31, 2001, net
income, excluding the amortization of goodwill, would have
been $264.9 million and basic and diluted earnings per share
would have been $1.38 and $1.37, respectively.
In November 2002, the Financial Accounting Standards Board
(“FASB”) issued FASB Interpretation Number (“FIN”) 45,
“Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others.” FIN 45 requires recognition of an initial liability for the
fair value of the guarantor’s obligation upon issuance of certain
guarantees. Disclosure requirements have been expanded to
include information about each guarantee, even if the likelihood
of any required payment is remote. We adopted the disclosure
requirements of FIN 45 as of December 31, 2002. On January
1, 2003, we adopted the initial recognition and measurement
provisions which were effective on a prospective basis for
guarantees issued or modified after December 31, 2002. The
implementation of FIN 45 did not have a material impact on our
results of operations or financial position at adoption or during
the year ended December 31, 2003.
In January 2003, the FASB issued FIN 46, “Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51.” In
December 2003, the FASB issued a revision to FIN 46 (“FIN
46-R”). The modifications that were incorporated into FIN 46-
R did not impact us or our implementation of FIN 46. FIN 46
requires consolidation of variable interest entities by the pri-
mary beneficiary if certain criteria are met. For variable interest
entities created or acquired after January 31, 2003, we adopt-
ed the provisions of FIN 46 in our first quarter of 2003. For vari-
able interest entities created or acquired prior to February 1,
2003, we adopted the provisions of FIN 46 in our second quar-
ter of 2003. We have evaluated our joint ventures, minority
interests in affiliates and other arrangements to determine if
they are variable interest entities. One of our minority interests,
a ship repair facility in which we invested in April 2001, is a vari-
able interest entity under FIN 46; however, we are not the pri-
mary beneficiary and accordingly do not consolidate this entity.
As of December 31, 2003, our investment in this entity includ-
ing equity and loans, which is also our maximum exposure to
loss, was approximately $41 million.
In January 2003, we adopted SFAS No. 146, “Accounting for
Costs Associated with Exit or Disposal Activities.” SFAS No.
146 requires that liabilities for costs associated with an exit
activity or disposal of long-lived assets be recognized when the
liabilities are incurred and when the fair value can be deter-
mined. The implementation of SFAS No. 146 had no impact on
our results of operations or financial position at adoption or
during the year ended December 31, 2003.
In April 2003, the FASB issued SFAS No. 149, “Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities.” SFAS No. 149 amends and clarifies accounting and
reporting for derivative instruments, in particular, the circum-
stances under which a contract with an initial net investment
meets the characteristics of a derivative and when a derivative
contains a financing component. For contracts entered into or
modified after June 30, 2003, we adopted the provisions of
SFAS No. 149 in our third quarter of 2003. The implementation
of SFAS No. 149 had no impact on our results of operations or
financial position at adoption or during the year ended
December 31, 2003.
In May 2003, the FASB issued SFAS No. 150, “Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity.” SFAS No. 150 establishes standards to
classify and measure certain financial instruments as liabilities
which, under previous guidance, were classified as equity. For
financial instruments entered into or modified after May 31,
2003, we adopted the provisions of SFAS No. 150 in our sec-
ond quarter of 2003. For financial instruments entered into or
modified prior to June 1, 2003, we adopted the provisions of
SFAS No. 150 in our third quarter of 2003. The implementation
of SFAS No. 150 had no impact on our results of operations or
financial position at adoption or during the year ended
December 31, 2003.
In December 2003, the FASB issued a revision to SFAS No.
132, “Employers’ Disclosures about Pensions and Other
Postretirement Benefits, an amendment of FASB Statements
No. 87, 88 and 106.” The revised SFAS No. 132 requires addi-
tional disclosures about the assets, obligations, cash flows and
net periodic benefit cost of defined benefit pension plans and
other postretirement benefit plans. The new disclosures are
effective for financial statements with fiscal years ending after
December 15, 2003. The implementation of the revised SFAS
No. 132 had no impact on the disclosures to our financial state-
ments for the year ended December 31, 2003.
ROYAL CARIBBEAN CRUISES LTD. 25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)