Waste Management 2011 Annual Report Download - page 115

significantly, if it is determined that the expansion capacity should no longer be considered in calculating the
recoverability of the landfill asset, we may be required to recognize an asset impairment or incur significantly
higher amortization expense. If at any time management makes the decision to abandon the expansion effort, the
capitalized costs related to the expansion effort are expensed immediately.
Environmental Remediation Liabilities
We are subject to an array of laws and regulations relating to the protection of the environment. Under
current laws and regulations, we may have liabilities for environmental damage caused by our operations, or for
damage caused by conditions that existed before we acquired a site. These liabilities include potentially
responsible party (“PRP”) investigations, settlements, and certain legal and consultant fees, as well as costs
directly associated with site investigation and clean up, such as materials, external contractor costs and
incremental internal costs directly related to the remedy. We provide for expenses associated with environmental
remediation obligations when such amounts are probable and can be reasonably estimated. We routinely review
and evaluate sites that require remediation and determine our estimated cost for the likely remedy based on a
number of estimates and assumptions.
Where it is probable that a liability has been incurred, we estimate costs required to remediate sites based on
site-specific facts and circumstances. We routinely review and evaluate sites that require remediation,
considering whether we were an owner, operator, transporter, or generator at the site, the amount and type of
waste hauled to the site and the number of years we were associated with the site. Next, we review the same type
of information with respect to other named and unnamed PRPs. Estimates of the cost for the likely remedy are
then either developed using our internal resources or by third-party environmental engineers or other service
providers. Internally developed estimates are based on:
‰Management’s judgment and experience in remediating our own and unrelated parties’ sites;
‰Information available from regulatory agencies as to costs of remediation;
‰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.
Asset Impairments
Our long-lived assets, including landfills and landfill expansions, are carried on our financial statements
based on their cost less accumulated depreciation or amortization. We monitor the carrying value of our long-
lived assets for potential impairment whenever events or changes in circumstances, including management
decisions pertaining to such assets, indicate that their carrying amounts may not be recoverable. These events or
changes in circumstances are referred to as impairment indicators. If an impairment indicator occurs, we perform
a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected
future cash flows. If cash flows cannot be separately and independently identified for a single asset, we will
determine whether an impairment has occurred for the group of assets for which we can identify the projected
cash flows. If the carrying values are in excess of undiscounted expected future cash flows, we measure any
impairment by comparing the fair value of the asset or asset group to its carrying value. Fair value is generally
determined by considering (i) internally developed discounted projected cash flow analysis of the asset or asset
group; (ii) actual third-party valuations; and/or (iii) information available regarding the current market for similar
assets. If the fair value of an asset or asset group is determined to be less than the carrying amount of the asset or
asset group, an impairment in the amount of the difference is recorded in the period that the impairment indicator
occurs and is included in the “(Income) expense from divestitures, asset impairments and unusual items” line
item in our Consolidated Statement of Operations. Estimating future cash flows requires significant judgment
and projections may vary from the cash flows eventually realized, which could impact our ability to accurately
assess whether an asset has been impaired.
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