Royal Caribbean Cruise Lines 2013 Annual Report Download - page 82
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Segment Reporting
We operate five wholly-owned cruise brands, Royal
Caribbean International, Celebrity Cruises, Azamara
Club Cruises, Pullmantur and CDF Croisières de France.
In addition, we have a 50% investment in a joint ven-
ture with TUI AG which operates the brand TUI Cruises.
We believe our global brands possess the versatility
to enter multiple cruise market segments within the
cruise vacation industry. Although each of our brands
has its own marketing style as well as ships and crews
of various sizes, the nature of the products sold and
services delivered by our brands share a common
base (i.e. the sale and provision of cruise vacations).
Our brands also have similar itineraries as well as
similar cost and revenue components. In addition,
our brands source passengers from similar markets
around the world and operate in similar economic
environments with a significant degree of commercial
overlap. As a result, our brands (including TUI Cruises)
have been aggregated as a single reportable segment
based on the similarity of their economic character-
istics, types of consumers, regulatory environment,
maintenance requirements, supporting systems and
processes as well as products and services provided.
Our Chairman and Chief Executive Officer has been
identified as the chief operating decision-maker and
all significant operating decisions including the alloca-
tion of resources are based upon the analyses of the
Company as one segment.
Information by geographic area is shown in the table
below. Passenger ticket revenues are attributed to
geographic areas based on where the reservation
originates.
Passenger ticket revenues:
United States
All other countries
Recent Accounting Pronouncements
In March 2013, amended guidance was issued regard-
ing the release of cumulative translation adjustments
into net income. The new guidance provides clarifi-
cation of when to release the cumulative translation
adjustment into net income when a parent either sells
a part or all of its investment in a foreign entity or no
longer holds a controlling financial interest in a sub-
sidiary or group of assets within a foreign entity. This
guidance will be effective for our interim and annual
reporting periods beginning after December 15, 2013.
The adoption of this newly issued guidance is not
expected to have a material impact on our consoli-
dated financial statements, but will have an impact
on the accounting for future sales of investments or
changes in control of foreign entities.
In January 2014, amended guidance was issued
regarding the accounting of service concession
arrangements. The new guidance defines a service
concession as an arrangement between a public-
sector entity grantor and an operating entity under
which the operating entity operates and maintains
the grantor’s infrastructure for a specified period of
time and in return receives payments from the grantor
and or third party user for use of the infrastructure.
The guidance prohibits the operating entity from
accounting for a service concession arrangement as
a lease and from recording the infrastructure used
in the arrangement within property, plant and equip-
ment. This guidance must be applied using a modi-
fied retrospective approach and will be effective for
our interim and annual reporting periods beginning
after December 15, 2014. Early adoption is permitted.
The adoption of this newly issued guidance is not
expected to have a material impact on our consoli-
dated financial statements.
Reclassifications
For the year ended December 31, 2012, $7.7 million
has been reclassified in the consolidated statements
of cash flows from Other, net to Loss (gain) on deriva-
tive instruments not designated as hedges within Net
cash provided by operating activities in order to con-
form to the current year presentation.
NOTE 3. GOODWILL
The carrying amount of goodwill attributable to our
Royal Caribbean International and Pullmantur report-
ing units was as follows (in thousands):
Royal
Caribbean
International Pullmantur Total
Balance at
December 31, 2011
Impairment charge — () ()
Foreign currency
translation
adjustment
Balance at
December 31, 2012
Foreign currency
translation
adjustment ()
Balance at
December 31, 2013
In 2012, we determined the implied fair value of good-
will for the Pullmantur reporting unit was $145.5 mil-
lion and recognized an impairment charge of $319.2
million based on a probability-weighted discounted
cash flow model further discussed below. This impair-
ment charge was recognized in earnings during the
fourth quarter of 2012 and is reported within Impair-
ment of Pullmantur related assets within our consoli-
dated statements of comprehensive income (loss).