Waste Management 2011 Annual Report Download - page 167

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Revenue Recognition
Our revenues are generated from the fees we charge for waste collection, transfer, disposal and recycling
services; from the sale of electricity, steam, and landfill gas, which are byproducts of our waste-to-energy and
landfill operations; and from the sale of recyclable commodities, oil and gas and organic lawn and garden
products. The fees charged for our services are generally defined in our service agreements and vary based on
contract-specific terms such as frequency of service, weight, volume and the general market factors influencing a
region’s rates. The fees we charge for our services generally include fuel surcharges, which are intended to pass
through to customers increased direct and indirect costs incurred because of changes in market prices for fuel.
We generally recognize revenue as services are performed or products are delivered. For example, revenue
typically is recognized as waste is collected, tons are received at our landfills or transfer stations, recycling
commodities are delivered or as kilowatts are delivered to a customer by a waste-to-energy facility or
independent power production plant.
Tangible product revenues primarily include the sale of recyclable commodities at our material recovery
facilities and through our recycling brokerage services and, to a lesser extent, sales of oil and gas and organic
lawn and garden products.
We bill for certain services prior to performance. Such services include, among others, certain residential
contracts that are billed on a quarterly basis and equipment rentals. These advance billings are included in
deferred revenues and recognized as revenue in the period service is provided.
Capitalized Interest
We capitalize interest on certain projects under development, including internal-use software and landfill
expansion projects, and on certain assets under construction, including operating landfills, landfill gas-to-energy
projects and waste-to-energy facilities. During 2011, 2010 and 2009, total interest costs were $503 million,
$490 million and $443 million, respectively, of which $22 million was capitalized in 2011 and $17 million was
capitalized in both 2010 and 2009. In 2011 and 2010, interest was capitalized primarily for landfill construction
costs and landfill gas-to-energy construction projects. The interest capitalized in 2009 was primarily for landfill
construction costs.
Income Taxes
The Company is subject to income tax in the United States, Canada and Puerto Rico. Current tax obligations
associated with our provision for income taxes are reflected in the accompanying Consolidated Balance Sheets as
a component of “Accrued liabilities,” and the deferred tax obligations are reflected in “Deferred income taxes.”
Deferred income taxes are based on the difference between the financial reporting and tax basis of assets
and liabilities. The deferred income tax provision represents the change during the reporting period in the
deferred tax assets and deferred tax liabilities, net of the effect of acquisitions and dispositions. Deferred tax
assets include tax loss and credit carry-forwards and are reduced by a valuation allowance if, based on available
evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Significant judgment is required in assessing the timing and amounts of deductible and taxable items. We
establish reserves for uncertain tax positions when, despite our belief that our tax return positions are fully
supportable, we believe that certain positions may be challenged and potentially disallowed. When facts and
circumstances change, we adjust these reserves through our provision for income taxes.
To the extent interest and penalties may be assessed by taxing authorities on any underpayment of income
tax, such amounts have been accrued and are classified as a component of income tax expense in our
Consolidated Statements of Operations.
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