Waste Management 2013 Annual Report Download - page 184

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fair value is typically estimated using an income approach. The income approach is based on the long-term
projected future cash flows. We discount the estimated cash flows to present value using a weighted-average cost
of capital that considers factors such as market assumptions, the timing of the cash flows and the risks inherent in
those cash flows. We believe that this approach is appropriate because it provides a fair value estimate based
upon the expected long-term performance considering the economic and market conditions that generally affect
our business.
Fair value computed by this method is arrived at using a number of factors, including projected future
operating results, economic projections, anticipated future cash flows, comparable marketplace data and the cost
of capital. There are inherent uncertainties related to these factors and to our judgment in applying them to this
analysis. However, we believe that this method provides a reasonable approach to estimating the fair value of the
reporting units.
Restricted Trust and Escrow Accounts
As of December 31, 2013, our restricted trust and escrow accounts consist principally of funds deposited for
purposes of settling landfill final capping, closure, post-closure and environmental remediation obligations. We
often also have restricted trust and escrow account balances related to funds received from the issuance of tax-
exempt bonds held in trust for the construction of various projects or facilities. As of December 31, 2013 and
2012, we had $167 million and $138 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
one year of the debt issuance. When the debt matures, we generally repay our obligation with cash on hand and
the debt repayments are included as a financing activity in the Consolidated Statements of Cash Flows.
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