Waste Management 2014 Annual Report Download - page 206

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fixed-Income Securities
We invest a portion of our restricted trust and escrow balances in fixed-income securities, including U.S.
Treasury securities, U.S. agency securities, municipal securities and mortgage- and asset-backed securities. We
measure the fair value of these securities using quoted prices for identical or similar assets in inactive markets.
The fair value of our fixed-income securities approximates our cost basis in these investments.
Redeemable Preferred Stock
In 2011, we made a noncontrolling investment in redeemable preferred stock of an unconsolidated entity.
The fair value of this investment increased by $4 million during 2014 due to an increase in the price per share
established in a recent stock issuance. In addition, we received $15 million of redeemable preferred stock in
conjunction with the sale of our Puerto Rico operations and certain other collection and landfill assets in the
second quarter of 2014, as discussed in Note 19.
Such preferred stock is included in “Investments in unconsolidated entities” in our Consolidated Balance
Sheet. The fair values of these investments have been measured based on third-party investors’ recent or pending
transactions in these securities, which are considered the best evidence of fair value currently available. When
this evidence is not available, we use other valuation techniques as appropriate and available. These valuation
methodologies may include transactions in similar instruments, discounted cash flow techniques, third-party
appraisals or industry multiples and public comparables.
Foreign Currency Derivatives
Our foreign currency derivatives are valued using a third-party pricing model that incorporates information
about forward Canadian dollar rates, or observable market data, as of the reporting date. The third-party pricing
model used to value our foreign currency derivatives also incorporates Company and counterparty credit
valuation adjustments, as appropriate. Counterparties to these contracts are financial institutions who participate
in our $2.25 billion revolving credit facility. Valuations may fluctuate significantly from period-to-period due to
volatility in the Canadian dollar to U.S. dollar exchange rate.
Interest Rate Derivatives
As of December 31, 2013, we were party to forward-starting interest rate swaps that were designated as cash
flow hedges of anticipated interest payments for future fixed-rate debt issuances. Our forward-starting interest
rate swaps were LIBOR-based instruments. Accordingly, these derivatives were valued using a third-party
pricing model that incorporated information about LIBOR yield curves, which is considered observable market
data, for each instrument’s respective term. The third-party pricing model used to value our interest rate
derivatives also incorporated Company and counterparty credit valuation adjustments, as appropriate.
Counterparties to our interest rate contracts are financial institutions who participate in our $2.25 billion
revolving credit facility. During the first quarter of 2014, our forward-starting interest rate swaps matured.
Refer to Notes 8 and 14 for additional information regarding our derivative instruments discussed above.
Fair Value of Debt
At December 31, 2014 the carrying value of our debt was approximately $9.4 billion compared with
approximately $10.2 billion at December 31, 2013. The carrying value of our debt includes adjustments
associated with fair value hedge accounting related to our interest rate swaps as discussed in Note 8.
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