Waste Management 2007 Annual Report Download - page 60

Basis of Presentation of Consolidated and Segment Financial Information
Accounting Changes — FIN 48, Accounting for Uncertainty in Income Taxes (an interpretation of FASB
Statement No. 109) and FSP No. 48-1, Definition of Settlement in FASB Interpretation No. 48 — Effective January 1,
2007, we adopted FIN 48 and FSP No. 48-1. FIN 48 prescribes a recognition threshold and measurement attribute
for financial statement recognition and measurement of tax positions taken or expected to be taken in tax returns. In
addition, FIN 48 provides guidance on the de-recognition, classification and disclosure of tax positions, as well as
the accounting for related interest and penalties. FSP No. 48-1 provides guidance associated with the criteria that
must be evaluated in determining if a tax position has been effectively settled and should be recognized as a
tax benefit.
SFAS No. 123(R) — Share-Based Payment — On January 1, 2006, we adopted SFAS No. 123 (revised 2004),
Share-Based Payment, which requires compensation expense to be recognized for all share-based payments made
to employees based on the fair value of the award at the date of grant. We adopted SFAS No. 123(R) using the
modified prospective method, which results in (i) the recognition of compensation expense using the provisions of
SFAS No. 123(R) for all share-based awards granted or modified after December 31, 2005 and (ii) the recognition of
compensation expense using the provisions of SFAS No. 123, Accounting for Stock-Based Compensation for all
unvested awards outstanding at the date of adoption.
Refer to Note 2 of our Consolidated Financial Statements for additional information related to the impact of
the implementation of these new accounting pronouncements on our results of operations and financial position.
Reclassification of Segment Information — In the first quarter of 2007, we realigned our Eastern, Midwest and
Western Group organizations to facilitate improved business execution. We moved certain market areas in the
Eastern and Midwest Groups to the Midwest and Western Groups, respectively. In addition, in early 2007 we moved
certain of our WMRA operations to our Western Group to more closely align their recycling operations with the
related collection, transfer and disposal operations. We have reflected the impact of these realignments for all
periods presented to provide financial information that consistently reflects our current approach to managing our
operations.
Critical Accounting Estimates and Assumptions
In preparing our financial statements, we make numerous estimates and assumptions that affect the accounting
for and recognition and disclosure of assets, liabilities, stockholders’ equity, revenues and expenses. We must make
these estimates and assumptions because certain information that we use is dependent on future events, cannot be
calculated with a high degree of precision from data available or simply cannot be readily calculated based on
generally accepted methodologies. In some cases, these estimates are particularly difficult to determine and we
must exercise significant judgment. In preparing our financial statements, the most difficult, subjective and complex
estimates and the assumptions that deal with the greatest amount of uncertainty relate to our accounting for landfills,
environmental remediation liabilities, asset impairments and self-insurance reserves and recoveries, as described
below. Actual results could differ materially from the estimates and assumptions that we use in the preparation of
our financial statements.
Landfills — The cost estimates for final capping, closure and post-closure activities at landfills for which we
have responsibility are estimated based on our interpretations of current requirements and proposed or anticipated
regulatory changes. We also estimate additional costs, pursuant to the requirements of SFAS No. 143, based on the
amount a third party would charge us to perform such activities even when we expect to perform these activities
internally. We estimate the airspace to be consumed related to each final capping event and the timing of each final
capping event and of closure and post-closure activities. Because landfill final capping, closure and post-closure
obligations are measured at estimated fair value using present value techniques, changes in the estimated timing of
future landfill final capping and closure and post-closure activities would have an effect on these liabilities, related
assets and results of operations.
Landfill Costs — We estimate the total cost to develop each of our landfill sites to its remaining permitted and
expansion capacity. This estimate includes such costs as landfill liner material and installation, excavation for
airspace, landfill leachate collection systems, landfill gas collection systems, environmental monitoring equipment
for groundwater and landfill gas, directly related engineering, capitalized interest, on-site road construction and
other capital infrastructure costs. Additionally, landfill development includes all land purchases for landfill
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