Waste Management 2008 Annual Report Download - page 103
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Please find page 103 of the 2008 Waste Management annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.• The number, financial resources and relative degree of responsibility of other PRPs who may be liable for
remediation of a specific site; and
• The typical allocation of costs among PRPs unless the actual allocation has been determined.
There can sometimes be a range of reasonable estimates of the costs associated with the likely remedy of a site. In
these cases, we use the amount within the range that constitutes our best estimate. If no amount within the range
appears to be a better estimate than any other, we use the amounts that are the low ends of such ranges in accordance
with SFAS No. 5, Accounting for Contingencies and its Interpretations. If we used the high ends of such ranges, our
aggregate potential liability would be approximately $135 million higher on a discounted basis than the $299 million
recorded in the Consolidated Financial Statements as of December 31, 2008.
Estimating our degree of responsibility for remediation of a particular site is inherently difficult and
determining the method and ultimate cost of remediation requires that a number of assumptions be made. Our
ultimate responsibility may differ materially from current estimates. It is possible that technological, regulatory or
enforcement developments, the results of environmental studies, the inability to identify other PRPs, the inability of
other PRPs to contribute to the settlements of such liabilities, or other factors could require us to record additional
liabilities that could be material. Additionally, our ongoing review of our remediation liabilities could result in
revisions that could cause upward or downward adjustments to income from operations. These adjustments could
also be material in any given period.
Where we believe that both the amount of a particular environmental remediation liability and the timing of the
payments are reliably determinable, we inflate the cost in current dollars (by 2.5% at both December 31, 2008 and
December 31, 2007) until the expected time of payment and discount the cost to present value using a risk-free
discount rate, which is based on the rate for United States Treasury bonds with a term approximating the weighted
average period until settlement of the underlying obligation. We determine the risk-free discount rate and the
inflation rate on an annual basis unless interim changes would significantly impact our results of operations. For
remedial liabilities that have been discounted, we include interest accretion, based on the effective interest method,
in “Operating” costs and expenses in our Consolidated Statements of Operations. The following table summarizes
the impacts of revisions in the risk-free discount rate applied to our environmental remediation liabilities during the
reported periods (in millions) and the risk-free discount rate applied as of each reporting date:
2008 2007 2006
Years Ended December 31,
Net decrease (increase) in income before taxes(a), (b) ................ $ 27 $ 8 $ (6)
Risk-free discount rate applied to environmental remediation
liabilities(b) ............................................. 2.25% 4.00% 4.75%
(a) In 2008, the net charge to income from operations is reflected in our Consolidated Statement of Operations as a
$33 million charge to “Operating” expenses and a $6 million reduction in “Minority interest” expense. In both
2007 and 2006, the reported amounts were included in “Operating” expenses in our Consolidated Statements
of Operations.
(b) The impact to earnings in each year also includes the effect of discount rate adjustments on our environmental
remediation recovery assets. In 2006 and 2007, these discount rate adjustments were also related to changes in
risk-free interest rates. As a result of our adoption of SFAS No. 157, in 2008, this impact is based on the credit-
adjusted, risk-free interest rates of third parties.
The portion of our recorded environmental remediation liabilities that has never been subject to inflation or
discounting as the amounts and timing of payments are not readily determinable was $47 million at both
December 31, 2008 and 2007. Had we not inflated and discounted any portion of our environmental remediation
liability, the amount recorded would have been decreased by $6 million at December 31, 2008 and increased by
$28 million at December 31, 2007.
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)