Waste Management 2011 Annual Report Download - page 155

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the entity’s performance and (ii) the obligation to absorb losses and the right to receive benefits from the variable
interest entity that could be significant from the perspective of the entity. The new guidance also requires that we
continually reassess whether we are the primary beneficiary of a variable interest entity rather than conducting a
reassessment only upon the occurrence of specific events.
As a result of our implementation of this guidance, effective January 1, 2010, we deconsolidated certain
final capping, closure, post-closure and environmental remediation trusts because we share power over
significant activities of these trusts with others. Our financial interests in these entities are discussed in Note 20.
The deconsolidation of these trusts has not materially affected our financial position, results of operations or cash
flows during the periods presented.
Reclassifications
Certain reclassifications have been made to our prior period consolidated financial information in order to
conform to the current year presentation.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of WM, 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, 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 methods. 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 present the greatest amount of uncertainty relate to our accounting for
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.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash on deposit and money market funds that invest in
U.S. government obligations with 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 for credit extensions. We also control our
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