2018 Annual Report for Norwegian Cruiseline Holdings - F-12

Recently Issued and Adopted Accounting Guidance
In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):
Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (a consensus of
the FAS Emerging Issues Task Force), which is designed to align the accounting for costs of implementing a cloud computing service
arrangement, regardless of whether the hosting arrangement conveys a license to the hosted software. The update requires that for hosting
arrangements considered to be a service contract, the criteria for capitalization of developing or obtaining internal-use software shall be
applied. The update is effective for annual periods, including interim periods within those annual periods, beginning after December 15,
2020, with early adoption permitted, including adoption in any interim period. A prospective or retrospective transition approach must be
elected. The Company is evaluating the impact of this guidance on the Company's consolidated financial statements.
On January 1, 2018, the Company adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to
Accounting for Hedging Activities, which simplifies the accounting for derivatives. For derivative instruments that are designated and qualify
as cash flow hedges, the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss),
reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and presented in the same
income statement line item as the earnings effect of the hedged item. The Company recorded a cumulative effect adjustment to accumulated
other comprehensive income (loss) with a corresponding adjustment to the opening balance of retained earnings related to the elimination of
the separate measurement of ineffectiveness for its cash flow hedges, upon adoption. The adjustments were not material to the Company's
consolidated financial statements. We refer you to Note 9- "Fair Value Measurements and Derivatives" in these notes to consolidated
financial statements.
On January 1, 2018, the Company adopted ASU No. 2016-16, Income Taxes (Topic 740) - Intra-Entity Transfers of Assets Other Than
Inventory, which requires companies to recognize the income-tax consequences of an intra-entity transfer of an asset other than inventory
when the transfer occurs, rather than when the asset has been sold to an outside party. The Company recorded, upon adoption, a cumulativeeffect adjustment to retained earnings of $19.1 million, which captures the write-off of previously unamortized deferred income tax expense
from past intra-entity transfers involving assets other than inventory not previously recognized under accounting principles generally
accepted in the U.S.
In December 2017, the Act was enacted, and among other provisions, reduced the U.S. federal corporate income tax rate from 35% to 21%.
Also in December 2017, the SEC staff issued Staff Accounting Bulletin ("SAB") No. 118, which addresses the recognition of provisional
amounts when a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable
detail to complete its accounting for the effect of the changes by the Act. The measurement period ends when a company has obtained,
prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. The Company completed the
accounting for the tax effects of enactment of the Act. There was no material change to the $7.4 million reduction of the value of net deferred
tax liabilities (which represent future tax expenses) recorded in 2017 as a discrete tax benefit resulting from the lower U.S. federal corporate
income tax rate under the Act. Other aspects of the Act were either not applicable or did not have a material impact on the Company's
consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill
Impairment, which simplifies the test for goodwill impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a
goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. The
guidance is effective for annual or any interim goodwill impairment tests in years beginning after December 15, 2019, with early adoption
permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect to
early adopt this guidance. The Company will evaluate, upon adoption of this guidance, the impact of this guidance on the Company's
consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement,
presentation and disclosure of leases. The update was issued to increase transparency and comparability among organizations by recognizing
rights and obligations resulting from leases as lease assets and liabilities on the balance sheet and disclosing key information about leasing
arrangements for leases with a term of 12 months or more. The update modifies lessors' classification criteria for leases and the accounting
for sales-type and direct financing leases. The update requires qualitative and quantitative disclosures designed to give financial statement
users additional information on the amount, timing, and uncertainty of cash flows arising from leases. The update is effective for annual
reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company has engaged a third
party to assist in reviewing the Company's existing leases and evaluating the Company's existing contracts to identify those that are
considered to be leases under the new guidance. The Company will elect to combine lease and non-lease components as a lessee, to keep
leases with an initial term of 12 months or less off the balance sheet, and, if any non-lease component associated with the lease component is
the predominant component, the Company will account for the combined component in accordance with FASB ASU No. 2014-09, Revenue
from Contracts with Customers (Topic 606) ("Topic 606"), as the lessor. The update is to be applied retrospectively with a cumulative-effect
adjustment on January 1, 2019. The Company continues to evaluate the effect that the update will have on the Company's consolidated
financial statements. The Company expects the update to have a material effect on the Company's assets and liabilities, which will result in a
balance sheet presentation that is not comparable to the prior period in the first year of adoption. The Company does not expect the update to
have a material impact on the Company's annual results of operations and/or cash flows.

F-12

2018 Annual Report for Norwegian Cruiseline Holdings

Table of Contents for the Digital Edition of 2018 Annual Report for Norwegian Cruiseline Holdings