Waste Management 2013 Annual Report Download - page 186

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
other current assets, other long-term assets, accrued liabilities or other long-term liabilities, as appropriate. Any
ineffectiveness present in either fair value or cash flow hedges is recognized immediately in earnings without
offset. There was no significant ineffectiveness in 2013, 2012 or 2011.
‰Interest Rate Derivatives — Our previously outstanding “receive fixed, pay variable” interest rate swaps
associated with outstanding fixed-rate senior notes have been designated as fair value hedges for accounting
purposes. Accordingly, derivative assets are accounted for as an increase in the carrying value of our
underlying debt obligations and derivative liabilities are accounted for as a decrease in the carrying value of
our underlying debt instruments. These fair value adjustments are deferred and recognized as an adjustment
to interest expense over the remaining term of the hedged instruments. Treasury locks and forward-starting
swaps executed in prior years were designated as cash flow hedges for accounting purposes. Unrealized
changes in the fair value of these derivative instruments are recorded in “Accumulated other comprehensive
income” within the equity section of our Consolidated Balance Sheets. The associated balance in other
comprehensive income is reclassified to earnings as the hedged cash flows occur.
‰Foreign Currency Derivatives — Our foreign currency derivatives have been designated as cash flow
hedges for accounting purposes, which results in the unrealized changes in the fair value of the derivative
instruments being recorded in “Accumulated other comprehensive income” within the equity section of
our Consolidated Balance Sheets. The associated balance in other comprehensive income is reclassified to
earnings as the hedged cash flows affect earnings. In each of the periods presented, these derivatives have
effectively mitigated the impacts of the hedged transactions, resulting in immaterial impacts to our results
of operations for the periods presented.
‰Electricity Commodity Derivatives — Our “receive fixed, pay variable” electricity commodity swaps
have been designated as cash flow hedges for accounting purposes. The effective portion of the electricity
commodity swap gains or losses is initially reported as a component of “Accumulated other
comprehensive income” within the equity section of our Consolidated Balance Sheets and subsequently
reclassified into earnings when the forecasted transactions affect earnings.
Insured and Self-Insured Claims
We have retained a significant portion of the risks related to our health and welfare, automobile, general
liability and workers’ compensation claims programs. The exposure for unpaid claims and associated expenses,
including incurred but not reported losses, generally is estimated with the assistance of external actuaries and by
factoring in pending claims and historical trends and data. The gross estimated liability associated with settling
unpaid claims is included in “Accrued liabilities” in our Consolidated Balance Sheets if expected to be settled
within one year, or otherwise is included in long-term “Other liabilities.” Estimated insurance recoveries related
to recorded liabilities are reflected as current “Other receivables” or long-term “Other assets” in our Consolidated
Balance Sheets when we believe that the receipt of such amounts is probable.
Revenue Recognition
Our revenues are generated from the fees we charge for waste collection, transfer, disposal and recycling
and resource recovery 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.
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