Waste Management 2014 Annual Report Download - page 171

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 and landfill gas-to-
energy projects. During 2014, 2013 and 2012, total interest costs were $487 million, $500 million and $509
million, respectively, of which $16 million was capitalized in 2014, $19 million was capitalized in 2013 and $21
million was capitalized in 2012. In 2014, 2013 and 2012, interest was capitalized primarily for landfill
construction costs.
Income Taxes
The Company is subject to income tax in the United States and Canada. 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 U.S. Generally Accepted Accounting Principles (“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.
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