Waste Management 2015 Annual Report Download - page 102

Asset Impairments
Our long-lived assets, including landfills and landfill expansions, are carried on our financial statements
based on their cost less accumulated depreciation or amortization. We monitor the carrying value of our long-
lived assets for potential impairment on an ongoing basis and test the recoverability of such assets using
significant unobservable (“Level 3”) inputs whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable. These events or changes in circumstances, including management
decisions pertaining to such assets, are referred to as impairment indicators. If an impairment indicator occurs,
we perform a test of recoverability by comparing the carrying value of the asset or asset group to its
undiscounted expected future cash flows. If cash flows cannot be separately and independently identified for a
single asset, we will determine whether an impairment has occurred for the group of assets for which we can
identify the projected cash flows. If the carrying values are in excess of undiscounted expected future cash flows,
we measure any impairment by comparing the fair value of the asset or asset group to its carrying value. Fair
value is generally determined by considering (i) internally developed discounted projected cash flow analysis of
the asset or asset group; (ii) actual third-party valuations and/or (iii) information available regarding the current
market for similar assets. If the fair value of an asset or asset group is determined to be less than the carrying
amount of the asset or asset group, an impairment in the amount of the difference is recorded in the period that
the impairment indicator occurs and is included in the and “(Income) expense from divestitures, asset
impairments (other than goodwill) and unusual items” line item in our Consolidated Statement of Operations.
Estimating future cash flows requires significant judgment and projections may vary from the cash flows
eventually realized, which could impact our ability to accurately assess whether an asset has been impaired.
There are additional considerations for impairments of landfills, goodwill and other indefinite-lived
intangible assets, as described below.
Landfills — The assessment of impairment indicators and the recoverability of our capitalized costs
associated with landfills and related expansion projects require significant judgment due to the unique nature of
the waste industry, the highly regulated permitting process and the sensitive estimates involved. During the
review of a landfill expansion application, a regulator may initially deny the expansion application although the
expansion permit is ultimately granted. In addition, management may periodically divert waste from one landfill
to another to conserve remaining permitted landfill airspace, or a landfill may be required to cease accepting
waste, prior to receipt of the expansion permit. However, such events occur in the ordinary course of business in
the waste industry and do not necessarily result in impairment of our landfill assets because, after consideration
of all facts, such events may not affect our belief that we will ultimately obtain the expansion permit. As a result,
our tests of recoverability, which generally make use of a probability-weighted cash flow estimation approach,
may indicate that no impairment loss should be recorded. See Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations —Critical Accounting Estimates and Assumptions — Expansion
Airspace above for discussion of criteria involved in assessing our likelihood of obtaining an expansion permit.
During the year ended December 31, 2013, we recognized $262 million of charges to impair certain of our
landfills, primarily as a result of our consideration of management’s decision in the fourth quarter of 2013 not to
actively pursue expansion and/or development of such landfills. These charges were primarily associated with
two landfills in our Eastern Canada Area, which are no longer accepting waste. We had previously concluded
that receipt of permits for these landfills was probable. However, in connection with our asset rationalization and
capital allocation analysis, which was influenced, in part, by our acquisition of RCI, we determined that the
future costs to construct these landfills could be avoided as we are able to allocate disposal that would have gone
to these landfills to other facilities and not materially impact operations. As a result of management’s decision,
we determined that the carrying values of landfill assets were no longer able to be recovered by the undiscounted
cash flows attributable to these assets. As such, we wrote their carrying values down to their estimated fair values
using a market approach considering the highest and best use of the assets.
Goodwill — At least annually, and more frequently if warranted, we assess our goodwill for impairment
using Level 3 inputs.
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