Waste Management 2013 Annual Report Download - page 177

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
timing of each final capping event. The fair value of closure and post-closure obligations is developed based on
our estimates of the airspace consumed to date for the entire landfill and the expected timing of each closure and
post-closure activity. Because these obligations are measured at estimated fair value using present value
techniques, changes in the estimated cost or timing of future final capping, closure and post-closure activities
could result in a material change in these liabilities, related assets and results of operations. We assess the
appropriateness of the estimates used to develop our recorded balances annually, or more often if significant facts
change.
Changes in inflation rates or the estimated costs, timing or extent of future final capping, closure and post-
closure activities typically result in both (i) a current adjustment to the recorded liability and landfill asset and
(ii) a change in liability and asset amounts to be recorded prospectively over either the remaining capacity of the
related discrete final capping event or the remaining permitted and expansion airspace (as defined below) of the
landfill. Any changes related to the capitalized and future cost of the landfill assets are then recognized in
accordance with our amortization policy, which would generally result in amortization expense being recognized
prospectively over the remaining capacity of the final capping event or the remaining permitted and expansion
airspace of the landfill, as appropriate. Changes in such estimates associated with airspace that has been fully
utilized result in an adjustment to the recorded liability and landfill assets with an immediate corresponding
adjustment to landfill airspace amortization expense.
Interest accretion on final capping, closure and post-closure liabilities is recorded using the effective interest
method and is recorded as final capping, closure and post-closure expense, which is included in “Operating”
costs and expenses within our Consolidated Statements of Operations.
Amortization of Landfill Assets — The amortizable basis of a landfill includes (i) amounts previously
expended and capitalized; (ii) capitalized landfill final capping, closure and post-closure costs; (iii) projections of
future purchase and development costs required to develop the landfill site to its remaining permitted and
expansion capacity and (iv) projected asset retirement costs related to landfill final capping, closure and post-
closure activities.
Amortization is recorded on a units-of-consumption basis, applying expense as a rate per ton. The rate per
ton is calculated by dividing each component of the amortizable basis of a landfill by the number of tons needed
to fill the corresponding asset’s airspace. For landfills that we do not own, but operate through operating or lease
arrangements, the rate per ton is calculated based on expected capacity to be utilized over the lesser of the
contractual term of the underlying agreement or the life of the landfill.
We apply the following guidelines in determining a landfill’s remaining permitted and expansion airspace:
‰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 also 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 that 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;
‰It is likely that the approvals will be received within the normal application and processing time
periods for approvals in the jurisdiction in which the landfill is located;
‰We have a legal right to use or obtain land to be included in the expansion plan;
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