Waste Management 2011 Annual Report Download - page 165

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Restricted Trust and Escrow Accounts
As of December 31, 2011, our restricted trust and escrow accounts consist principally of (i) funds deposited
for purposes of settling landfill final capping, closure, post-closure and environmental remediation obligations;
and (ii) funds received from the issuance of tax-exempt bonds held in trust for the construction of various
projects or facilities. As of December 31, 2011 and 2010, we had $152 million and $146 million, respectively, of
restricted trust and escrow accounts, which are primarily included in long-term “Other assets” in our
Consolidated Balance Sheets.
Final Capping, Closure, Post-Closure and Environmental Remediation Funds — At several of our landfills,
we provide financial assurance by depositing cash into restricted trust funds or escrow accounts for purposes of
settling final capping, closure, post-closure and environmental remediation obligations. Balances maintained in
these trust funds and escrow accounts will fluctuate based on (i) changes in statutory requirements; (ii) future
deposits made to comply with contractual arrangements; (iii) the ongoing use of funds for qualifying final
capping, closure, post-closure and environmental remediation activities; (iv) acquisitions or divestitures of
landfills; and (v) changes in the fair value of the financial instruments held in the trust fund or escrow accounts.
Tax-Exempt Bond Funds — We obtain funds from the issuance of industrial revenue bonds for the
construction of disposal facilities and for equipment necessary to provide waste management services. Proceeds
from these arrangements are directly deposited into trust accounts, and we do not have the ability to use the funds
in regular operating activities. Accordingly, these borrowings are treated as non-cash financing activities and are
excluded from our Consolidated Statements of Cash Flows. As our construction and equipment expenditures are
documented and approved by the applicable bond trustee, the funds are released and we receive a cash
reimbursement. These cash reimbursements are reported in the Consolidated Statements of Cash Flows as an
investing activity when the cash is released from the trust funds. Generally, the funds are fully expended within a
few years of the debt issuance. When the debt matures, we repay our obligation with cash on hand and the debt
repayments are included as a financing activity in the Consolidated Statements of Cash Flows.
Investments in Unconsolidated Entities
Investments in unconsolidated entities over which the Company has significant influence are accounted for
under the equity method of accounting. Investments in affiliates in which the Company does not have the ability
to exert significant influence over the investees’ operating and financing activities are accounted for under the
cost method of accounting. The majority of our investments are accounted for under the equity method.
Foreign Currency
We have operations in Canada and investments in China and the United Kingdom. The functional currency
of our Canadian subsidiaries is Canadian dollars. The assets and liabilities of our foreign operations are translated
to U.S. dollars using the exchange rate at the balance sheet date. Revenues and expenses are translated to
U.S. dollars using the average exchange rate during the period. The resulting translation difference is reflected as
a component of comprehensive income. The foreign currency exposure associated with our investments has not
been material.
Derivative Financial Instruments
We primarily use derivative financial instruments to manage our risk associated with fluctuations in interest
rates, foreign currency exchange rates and market prices for electricity. We use interest rate swaps to maintain a
strategic portion of our long-term debt obligations at variable, market-driven interest rates. In 2009, we entered
into interest rate derivatives in anticipation of senior note issuances planned for 2010 through 2014 to effectively
lock in a fixed interest rate for those anticipated issuances. Foreign currency exchange rate derivatives are used to
hedge our exposure to changes in exchange rates for anticipated cash transactions between Waste Management
Holdings, Inc., a wholly-owned subsidiary (“WM Holdings”), and its Canadian subsidiaries. We use electricity
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