Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Stock-Based Employee Compensation

In February 2012, we redesigned our long-term incentive award program and began to grant performance shares to our officers in lieu of stock options.  Under our prior program, our officers received a combination of stock options and restricted stock units.  Beginning in February 2012, our officers instead receive their long-term incentive awards through a combination of performance shares and restricted stock units. Each performance share award is expressed as a target number of performance shares based upon the fair market value of our common stock on the date the award is issued.  The actual number of shares underlying each award (not to exceed 200% of the target number of performance shares) will be determined based upon the Company’s achievement of a specified performance target range. For the grants made in February 2012, the performance target is diluted earnings per share (“EPS”) for the year ended December 31, 2012, as adjusted by the Compensation Committee of our Board of Directors for events that are outside of management’s control. In February 2012, we issued a target number of 327,240 performance shares which will vest on the third anniversary of the award issue date.

We estimate the fair value of each performance share when the grant is authorized and the related service period has commenced.  We remeasure the fair value of each of our performance shares in each subsequent reporting period until the grant date has occurred, which represents the date when the performance conditions are satisfied.  We recognize compensation cost over the vesting period based on the probability of the service and performance requirements being achieved over the vesting period adjusted for each subsequent fair value measurement. If the specified service and performance requirements are not met, compensation expense will not be recognized and any previously recognized compensation expense will be reversed.

For further information on our significant accounting policies, refer to our annual report on Form 10-K for the year ended December 31, 2011.

Recently Adopted Accounting Standards

In January 2012, we adopted authoritative guidance issued in 2011, the purpose of which was to achieve consistent fair value measurements and to clarify certain disclosure requirements for fair value measurements. The guidance includes clarification about when the concept of highest and best use is applicable to fair value measurements, requires quantitative disclosures about inputs used and qualitative disclosures about the sensitivity of recurring Level 3 measurements, and requires the classification of all assets and liabilities measured at fair value in the fair value hierarchy, including those assets and liabilities which are not recorded at fair value but for which fair value is disclosed.  The adoption of this guidance did not have a material impact on our consolidated financial statements.  See Note 9. Fair Value Measurements and Derivative Instruments for our disclosures required under this guidance.

In January 2012, we adopted authoritative guidance issued in 2011 on the presentation of comprehensive income which requires an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate but consecutive statements.  The new guidance eliminates the option to report other comprehensive income and its components in the statement of changes in equity.  We elected to present this information using one continuous statement.  See our consolidated statements of comprehensive income (loss) above.

Other

Revenues and expenses include port costs that vary with guest head counts.  The amounts included in passenger ticket revenues on a gross basis were $103.8 million and $103.2 million for the second quarters of 2012 and 2011, respectively, and $216.9 million and $198.9 million for the six months ended June 30, 2012 and 2011, respectively.