Waste Management 2006 Annual Report Download - page 102

Any changes related to the capitalized and future cost of the landfill assets are then recognized in accordance with
our amortization policy, which would generally result in amortization expense being recognized prospectively over
the remaining capacity of the final capping event or the remaining permitted and expansion airspace of the landfill,
as appropriate. Changes in such estimates associated with airspace that has been fully utilized result in an
adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill
airspace amortization expense.
During the years ended December 31, 2006, 2005 and 2004, adjustments associated with changes in our
expectations for the timing and cost of future final capping, closure and post-closure of fully utilized airspace
resulted in $1 million, $13 million and $18 million in net credits to landfill airspace amortization expense,
respectively, with the majority of these credits resulting from revised estimates associated with final capping
changes. In managing our landfills, our engineers look for ways to reduce or defer our construction costs, including
final capping costs. Most of the benefit recognized in these years was the result of concerted efforts to improve the
operating efficiencies of our landfills allowing us to delay spending for final capping activities, landfill expansions
that resulted in reduced or deferred final capping costs, or completed final capping construction that cost less than
anticipated.
Interest accretion on final capping, closure and post-closure liabilities is recorded using the effective interest
method and is recorded as final capping, closure and post-closure expense, which is included in “Operating” costs
and expenses within our Consolidated Statements of Operations.
Amortization of Landfill Assets — The amortizable basis of a landfill includes (i) amounts previously
expended and capitalized; (ii) capitalized landfill final capping, closure and post-closure costs; (iii) projections
of future purchase and development costs required to develop the landfill site to its remaining permitted and
expansion capacity; and (iv) projected asset retirement costs related to landfill final capping, closure and post-
closure activities.
Amortization is recorded on a units-of-consumption basis, applying cost as a rate per ton. The rate per ton is
calculated by dividing each component of the amortizable basis of a landfill by the number of tons needed to fill the
corresponding asset’s airspace. For landfills that we do not own, but operate through operating or lease arrange-
ments, the rate per ton is calculated based on the lesser of the contractual term of the underlying agreement or the
life of the landfill.
We apply the following guidelines in determining a landfill’s remaining permitted and expansion airspace:
•Remaining Permitted Airspace — Our engineers, in consultation with third-party engineering consultants
and surveyors, are responsible for determining remaining permitted airspace at our landfills. The remaining
permitted airspace is determined by an annual survey, which is then used to compare the existing landfill
topography to the expected final landfill topography.
•Expansion Airspace — We also include currently unpermitted airspace in our estimate of remaining
permitted and expansion airspace in certain circumstances. First, to include airspace associated with an
expansion effort, we must generally expect the initial expansion permit application to be submitted within
one year, and the final expansion permit to be received within five years. Second, we must believe the
success of obtaining the expansion permit is likely, considering the following criteria:
• Personnel are actively working to obtain land use and local, state or provincial approvals for an expansion
of an existing landfill;
• It is likely that the approvals will be received within the normal application and processing time periods
for approvals in the jurisdiction in which the landfill is located;
• We have a legal right to use or obtain land to be included in the expansion plan;
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)