Waste Management 2011 Annual Report Download - page 113

landfills, environmental remediation liabilities, asset impairments, deferred income taxes and reserves associated with
our insured and self-insured claims. 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.
Landfills
Accounting for landfills requires that significant estimates and assumptions be made regarding (i) the cost to
construct and develop each landfill asset; (ii) the estimated fair value of final capping, closure and post-closure
asset retirement obligations, which must consider both the expected cost and timing of these activities; (iii) the
determination of each landfill’s remaining permitted and expansion airspace; and (iv) the airspace associated
with each final capping event.
Landfill Costs — We estimate the total cost to develop each of our landfill sites to its remaining permitted
and expansion capacity. This estimate includes such costs as landfill liner material and installation, excavation
for airspace, landfill leachate collection systems, landfill gas collection systems, environmental monitoring
equipment for groundwater and landfill gas, directly related engineering, capitalized interest, on-site road
construction and other capital infrastructure costs. Additionally, landfill development includes all land purchases
for the landfill footprint and required landfill buffer property. The projection of these landfill costs is dependent,
in part, on future events. The remaining amortizable basis of each landfill includes costs to develop a site to its
remaining permitted and expansion capacity and includes amounts previously expended and capitalized, net of
accumulated airspace amortization, and projections of future purchase and development costs.
Final Capping Costs — We estimate the cost for each final capping event based on the area to be finally
capped and the capping materials and activities required. The estimates also consider when these costs would
actually be paid and factor in inflation and discount rates. Our engineering personnel allocate final landfill
capping costs to specific final capping events. The landfill capacity associated with each final capping event is
then quantified and the final capping costs for each event are amortized over the related capacity associated with
the event as waste is disposed of at the landfill. We review these costs annually, or more often if significant facts
change. Changes in estimates, such as timing or cost of construction, for final capping events immediately impact
the required liability and the corresponding asset. When the change in estimate relates to a fully consumed asset,
the adjustment to the asset must be amortized immediately through expense. When the change in estimate relates
to a final capping event that has not been fully consumed, the adjustment to the asset is recognized in income
prospectively as a component of landfill airspace amortization.
Closure and Post-Closure Costs — We base our estimates for closure and post-closure costs on our
interpretations of permit and regulatory requirements for closure and post-closure monitoring and maintenance. The
estimates for landfill closure and post-closure costs also consider when the costs would actually be paid and factor
in inflation and discount rates. The possibility of changing legal and regulatory requirements and the forward-
looking nature of these types of costs make any estimation or assumption less certain. Changes in estimates for
closure and post-closure events immediately impact the required liability and the corresponding asset. When the
change in estimate relates to a fully consumed asset, the adjustment to the asset must be amortized immediately
through expense. When the change in estimate relates to a landfill asset that has not been fully consumed, the
adjustment to the asset is recognized in income prospectively as a component of landfill airspace amortization.
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 used to compare the existing landfill topography
to the expected final landfill topography.
Expansion Airspace — We include currently unpermitted expansion 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 on the expansion of an existing landfill, including efforts to obtain land
use and local, state or provincial approvals;
34