Waste Management 2008 Annual Report Download - page 98
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Please find page 98 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.3. Summary of Significant Accounting Policies
Principles of consolidation
The accompanying Consolidated Financial Statements include the accounts of WMI, its wholly-owned and
majority-owned subsidiaries and certain variable interest entities for which we have determined that we are the
primary beneficiary. All material intercompany balances and transactions have been eliminated. Investments in
entities in which we do not have a controlling financial interest are accounted for under either the equity method or
cost method of accounting, as appropriate.
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. Each of these
items is discussed in additional detail below. Actual results could differ materially from the estimates and
assumptions that we use in the preparation of our financial statements.
Cash and cash equivalents
Cash and cash equivalents consist primarily of cash on deposit and money market funds that invest in United
States government obligations, all of which have original maturities of three months or less.
Concentrations of credit risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and
cash equivalents, investments held within our trust funds and escrow accounts, accounts receivable and derivative
instruments. We make efforts to 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) maintaining 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, 2008 and 2007, no single
customer represented greater than 5% of total accounts receivable.
Trade and other receivables
Our receivables are recorded when billed or when cash is 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 the 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.
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)