Property and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property and equipment consists of the following (in thousands):



	2016			2015
Ships	$	23,978,822		$	22,102,025
Ship improvements	2,359,639			2,019,294
Ships under construction	354,425			734,998
Land, buildings and improvements, including leasehold improvements and port facilities	341,605			337,109
Computer hardware and software, transportation equipment and other	1,108,301			1,025,264
Total property and equipment	28,142,792			26,218,690
Less—accumulated depreciation and amortization	(7,981,365		)	(7,440,912		)
	$	20,161,427		$	18,777,778

Ships under construction include progress payments for the construction of new ships as well as planning, design, interest and other associated costs. We capitalized interest costs of $25.3 million, $26.5 million and $28.8 million for the years 2016, 2015 and 2014, respectively.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate potential impairment. During 2016, we sold our 51% interest in Pullmantur Holdings. For further information on the sale transaction, refer to Note 1. General. Due to this sale and the resulting change in the nature of the cash flows generated by the vessels that are owned by us and operated by Pullmantur Holdings, we reviewed these vessels for impairment. We determined that the undiscounted future cash flows of the vessels exceeded their carrying value; therefore, no impairment was required.

During 2016, we entered into agreements with STX France to build a fifth Oasis-class ship and a third and fourth "Project Edge" ship. Refer to Note 15. Commitments and Contingencies for further information.

In April 2016, we completed the previously announced sale of Splendour of the Seas to TUI Cruises. Concurrent with the acquisition, TUI Cruises leased the ship to Thomson Cruises, an affiliate of TUI AG, our joint venture partner, who will operate the ship. The gain recognized did not have a material effect to our consolidated financial statements.

In June 2016, we entered into an agreement to sell Legend of the Seas to Thomson Cruises. The sale is scheduled to be completed in March 2017 in order to retain the future revenues to be generated for sailings through that date. We expect to recognize a gain on the sale, which we do not expect will have a material effect to our annual consolidated financial statements.

During 2015, in conjunction with performing the two-step goodwill impairment test for the Pullmantur reporting unit, we identified that the estimated fair value of certain long-lived assets, consisting of two ships and three aircraft were less than their carrying values. As a result of this determination, we evaluated these assets pursuant to our long-lived asset impairment test, resulting in an impairment charge of $113.2 million to write down these assets to their estimated fair values. This impairment charge was recognized in earnings during the third quarter of 2015 and is reported within Impairment of Pullmantur related assets within our consolidated statements of comprehensive income (loss). Refer to Note 14. Fair Value Measurements and Derivative Instruments for further information regarding the estimated fair value calculation of these assets.

During 2015, Pullmantur sold Ocean Dream to an unrelated third party for $34.6 million. The purchase price was paid via a secured promissory note, payable over a nine-year period. The buyer's obligations under this loan accrue interest at the rate of 6.0% per annum and are secured by a first priority mortgage on the ship. The sale resulted in an immaterial gain that was deferred and is expected to be recognized at the end of the nine-year term.