Waste Management 2014 Annual Report Download - page 158

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Reclassifications
When necessary, reclassifications have been made to our prior period consolidated financial information in
order to conform to the current year presentation.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying Consolidated Financial Statements include the accounts of WM, its wholly-owned and
majority-owned subsidiaries and certain variable interest entities for which we have determined that we are the
primary beneficiary. All material intercompany balances and transactions have been eliminated. Investments in
entities in which we do not have a controlling financial interest are accounted for under either the equity method
or cost method of accounting, as appropriate.
Estimates and Assumptions
In preparing our financial statements, we make numerous estimates and assumptions that affect the
accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make
these estimates and assumptions because certain information that we use is dependent on future events, cannot be
calculated with precision from available data or simply cannot be calculated. In some cases, these estimates are
difficult to determine, and we must exercise significant judgment. In preparing our financial statements, the most
difficult, subjective and complex estimates and the assumptions that present the greatest amount of uncertainty
relate to our accounting for landfills, environmental remediation liabilities, asset impairments, deferred income
taxes and reserves associated with our insured and self-insured claims. Each of these items is discussed in
additional detail below. Actual results could differ materially from the estimates and assumptions that we use in
the preparation of our financial statements.
Cash and Cash Equivalents
Cash in excess of current operating requirements is invested in short-term interest-bearing instruments with
maturities of three months or less at the date of purchase and is stated at cost, which approximates market value.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and
cash equivalents, investments held within our trust funds and escrow accounts, accounts receivable and
derivative instruments. We make efforts to control our exposure to credit risk associated with these instruments
by (i) placing our assets and other financial interests with a diverse group of credit-worthy financial institutions;
(ii) holding high-quality financial instruments while limiting investments in any one instrument and
(iii) maintaining strict policies over credit extension that include credit evaluations, credit limits and monitoring
procedures, although generally we do not have collateral requirements for credit extensions. We also control our
exposure associated with trade receivables by discontinuing service, to the extent allowable, to non-paying
customers. However, our overall credit risk associated with trade receivables is limited due to the large number
of diverse customers we serve. At December 31, 2014 and 2013, no single customer represented greater than 5%
of total accounts receivable.
Trade and Other Receivables
Our receivables, which are recorded when billed, when services are performed or when cash is advanced,
are claims against third parties that will generally be settled in cash. The carrying value of our receivables, net of
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