Waste Management 2015 Annual Report Download - page 149

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
most significant portion of our rental obligations for landfill leases is contingent upon operating factors such as
disposal volumes and often there are no contractual minimum rental obligations. Contingent rental obligations
are expensed as incurred. For landfill capital leases that provide for minimum contractual rental obligations, we
record the present value of the minimum obligation as part of the landfill asset, which is amortized on a units-of-
consumption basis over the shorter of the lease term or the life of the landfill.
Acquisitions
We generally recognize assets acquired and liabilities assumed in business combinations, including
contingent assets and liabilities, based on fair value estimates as of the date of acquisition.
Contingent Consideration — In certain acquisitions, we agree to pay additional amounts to sellers
contingent upon achievement by the acquired businesses of certain negotiated goals, such as targeted revenue
levels, targeted disposal volumes or the issuance of permits for expanded landfill airspace. We have recognized
liabilities for these contingent obligations based on their estimated fair value at the date of acquisition with any
differences between the acquisition-date fair value and the ultimate settlement of the obligations being
recognized as an adjustment to income from operations.
Acquired Assets and Assumed Liabilities — Assets and liabilities arising from contingencies such as pre-
acquisition environmental matters and litigation are recognized at their acquisition-date fair value when their
respective fair values can be determined. If the fair values of such contingencies cannot be determined, they are
recognized at the acquisition date if the contingencies are probable and an amount can be reasonably estimated.
Acquisition-date fair value estimates are revised as necessary and accounted for as an adjustment to income
from operations if, and when, additional information regarding these contingencies becomes available to further
define and quantify assets acquired and liabilities assumed. All acquisition-related transaction costs have been
expensed as incurred.
Goodwill and Other Intangible Assets
Goodwill is the excess of our purchase cost over the fair value of the net assets of acquired businesses. We
do not amortize goodwill, but as discussed in the Asset Impairments section below, we assess our goodwill for
impairment at least annually.
Other intangible assets consist primarily of customer and supplier relationships, covenants not-to-compete,
licenses, permits (other than landfill permits, as all landfill-related intangible assets are combined with landfill
tangible assets and amortized using our landfill amortization policy), and other contracts. Other intangible assets
are recorded at acquisition date fair value and are generally amortized using either a 150% declining balance
approach or a straight-line basis as we determine appropriate. Customer and supplier relationships are typically
amortized over a term ranging between 10 and 15 years. Covenants not-to-compete are amortized over the term
of the non-compete covenant, which is generally two to five years. Licenses, permits and other contracts are
amortized over the definitive terms of the related agreements. If the underlying agreement does not contain
definitive terms and the useful life is determined to be indefinite, the asset is not amortized.
Asset Impairments
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
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