Waste Management 2007 Annual Report Download - page 97

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Cash and cash equivalents
Cash and cash equivalents consist primarily of cash on deposit, certificates of deposit, money market accounts,
and investment grade commercial paper purchased with original maturities of three months or less.
Short-term investments available for use
Periodically, we invest in auction rate securities and variable rate demand notes, which are debt instruments
with long-term scheduled maturities and periodic interest rate reset dates. The interest rate reset mechanism for
these instruments results in a periodic remarketing of the underlying securities through an auction process. Due to
the liquidity provided by the interest rate reset mechanism and the short-term nature of our investment in these
securities, they have been classified as current assets in our Consolidated Balance Sheets. As of December 31, 2006,
$184 million of investments in auction rate securities and variable rate demand notes have been included as a
component of current “Other assets.” We did not have any investments in this type of securities as of December 31,
2007. Gross purchases and sales of these investments are presented within “Cash flows from investing activities” in
our Consolidated Statements of Cash Flows.
Concentrations of credit risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and
cash equivalents, short-term investments, investments held within our trust funds and escrow accounts, accounts
receivable and derivative instruments. We control our exposure to credit risk associated with these instruments by
(i) placing our assets and other financial interests with a diverse group of credit-worthy financial institutions;
(ii) holding high-quality financial instruments while limiting investments in any one instrument; and (iii) main-
taining strict policies over credit extension that include credit evaluations, credit limits and monitoring procedures,
although generally we do not have collateral requirements. In addition, our overall credit risk associated with trade
receivables is limited due to the large number of geographically diverse customers we service. At December 31,
2007 and 2006, no single customer represented greater than 5% of total accounts receivable.
Trade and other receivables
Our receivables are recorded when billed or advanced and represent claims against third parties that will be
settled in cash. The carrying value of our receivables, net of the allowance for doubtful accounts, represents their
estimated net realizable value. We estimate our allowance for doubtful accounts based on historical collection
trends, type of customer, such as municipal or non-municipal, the age of outstanding receivables and existing
economic conditions. If events or changes in circumstances indicate that specific receivable balances may be
impaired, further consideration is given to the collectibility of those balances and the allowance is adjusted
accordingly. Past-due receivable balances are written-off when our internal collection efforts have been unsuc-
cessful in collecting the amount due. Also, we recognize interest income on long-term interest-bearing notes
receivable as the interest accrues under the terms of the notes.
Landfill accounting
Cost Basis of Landfill Assets — We capitalize various costs that we incur to make a landfill ready to accept
waste. These costs generally include expenditures for land (including the landfill footprint and required landfill
buffer property), permitting, excavation, liner material and installation, landfill leachate collection systems, landfill
gas collection systems, environmental monitoring equipment for groundwater and landfill gas, directly related
engineering, capitalized interest, and on-site road construction and other capital infrastructure costs. The cost basis
of our landfill assets also includes estimates of future costs associated with landfill final capping, closure and post-
closure activities in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations and its
Interpretations. These costs are discussed below.
62
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)