Waste Management 2013 Annual Report Download - page 187

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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, metals 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 2013, 2012 and 2011, total interest costs were $500 million, $509
million and $503 million, respectively, of which $19 million was capitalized in 2013, $21 million was capitalized
in 2012 and $22 million was capitalized in 2011. In 2013, 2012 and 2011, interest was capitalized primarily for
landfill construction costs and landfill gas-to-energy construction projects.
Income Taxes
The Company is subject to income tax in the United States, Canada, the United Kingdom 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.
Contingent Liabilities
We estimate the amount of potential exposure we may have with respect to claims, assessments and
litigation in accordance with GAAP. We are party to pending or threatened legal proceedings covering a wide
range of matters in various jurisdictions. It is difficult to predict the outcome of litigation, as it is subject to many
uncertainties. Additionally, it is not always possible for management to make a meaningful estimate of the
potential loss or range of loss associated with such contingencies.
Supplemental Cash Flow Information
Years Ended December 31,
Cash paid during the year (in millions): 2013 2012 2011
Interest, net of capitalized interest and periodic settlements from interest rate
swap agreements .............................................. $478 $485 $470
Income taxes ................................................... 511 366 306
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