Waste Management 2008 Annual Report Download - page 136
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Please find page 136 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.We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs. In measuring the fair value of our assets and liabilities, we use market data or assumptions that we believe
market participants would use in pricing an asset or liability, including assumptions about risk when appropriate. As
of December 31, 2008, our assets and liabilities that are measured at fair value on a recurring basis include the
following (in millions):
Total
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value Measurements Using
Assets:
Available-for-sale securities(a) ................ $365 $365 $ — $ —
Interest rate derivatives ...................... 92 — 92 —
Foreign currency derivatives .................. 28 — 28 —
Environmental remediation recovery assets(b) ..... 28 — — 28
Total assets............................. $513 $365 $120 $ 28
Liabilities:
Interest rate derivatives ...................... $ 1 $ — $ 1 $ —
(a) These assets include (i) restricted trusts and escrow accounts invested in money market mutual funds;
(ii) restricted trusts and escrow accounts invested in equity-based mutual funds, which are discussed further
below; and (iii) other equity securities, which are discussed further below.
(b) Changes in the fair value of these assets are generally related to (i) revisions in our estimates of the cost to
remediate a site because the amounts owed by third parties are directly related to the underlying environmental
remediation liabilities; (ii) receipt of funds from third parties; (iii) changes in our expectations for the recovery
of the balances; (iv) the accretion of interest income; and (v) changes in the applicable discount rates due to
either fluctuations in market interest rates or changes in the credit-worthiness of our counterparties. There have
not been any material changes in these fair value measurements during 2008.
We have determined the estimated fair value amounts of our financial instruments using available market
information and commonly accepted valuation methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value. Accordingly, our estimates are not necessarily
indicative of the amounts that we, or holders of the instruments, could realize in a current market exchange. The use
of different assumptions and/or estimation methodologies could have a material effect on the estimated fair values.
The fair value estimates are based on information available as of December 31, 2008. These amounts have not been
revalued since that date, and current estimates of fair value could differ significantly from the amounts presented.
Cash and cash equivalents and available-for-sale securities are reflected at fair value in our Consolidated
Financial Statements. The carrying values of trade accounts receivable, trade accounts payable and other receiv-
ables are reflected in our Consolidated Financial Statements at historical cost, which is materially representative of
their fair value principally because of the short-term maturities of these instruments.
Long-term investments — The cost basis of restricted trusts and escrow accounts invested in equity-based
mutual funds and other equity securities was $77 million as of December 31, 2008 and $73 million at December 31,
2007. Unrealized holding gains and losses on these instruments are recorded as either an increase or decrease to the
asset balance and deferred as a component of “Accumulated other comprehensive income” in the equity section of
our Consolidated Balance Sheets. The net unrealized holding losses on these instruments, net of taxes, were
$2 million as of December 31, 2008 and the net unrealized holding gains on these instruments, net of taxes, were
102
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)