Combine all ingredients in a large bowl; beat with a stand or hand mixer at medium speed just until combined (about 1 minute). Increase speed to high; continue to beat until the icing is thick and forms soft peaks (about 3 minutes).
Transfer half of icing to another bowl; stir in a drop or two of blue food coloring (depending on your preference). Transfer half of blue icing to a third bowl; add a little more water (about 2-3 teaspoons) to make it easier to spread. Transfer half of original white icing to a fourth bowl; add a little more water (about 2-3 teaspoons) to make it easier to spread. (If not using immediately, cover surface of icing with a dampened paper towel; cover bowl tightly with plastic wrap.)
Transfer the undiluted white and blue icings to pastry bags fitted with very small (1/16-inch round) tips. Trace edges of cookies with icing; let dry until hardened (about 30 minutes). With a small spoon, fill centers of cookies with diluted icing; decorate with sprinkles, glitter, and pearls. (When cookies are completely dry, use the undiluted icing to decorate further). Allow cookies to dry 8 hours or overnight.