Waste Management 2015 Annual Report Download - page 152

WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
When performing the impairment test for indefinite-lived intangible assets, we generally first conduct a
qualitative analysis to determine whether we believe it is more likely than not that an asset has been impaired. If
we believe an impairment has occurred, we then evaluate for impairment by comparing the estimated fair value
of assets to the carrying value. An impairment charge is recognized if the asset’s estimated fair value is less than
its carrying value.
Fair value is typically estimated using an income approach. The income approach is based on the long-term
projected future cash flows. We discount the estimated cash flows to present value using a weighted average cost
of capital that considers factors such as market assumptions, the timing of the cash flows and the risks inherent in
those cash flows. We believe that this approach is appropriate because it provides a fair value estimate based
upon the expected long-term performance considering the economic and market conditions that generally affect
our business.
Fair value computed by this method is arrived at using a number of factors, including projected future
operating results, economic projections, anticipated future cash flows, comparable marketplace data and the cost
of capital. There are inherent uncertainties related to these factors and to our judgment in applying them to this
analysis. However, we believe that this method provides a reasonable approach to estimating the fair value of the
reporting units.
Restricted Trust and Escrow Accounts
Our restricted trust and escrow accounts consist principally of funds deposited for purposes of settling
landfill final capping, closure, post-closure and environmental remediation obligations. At several of our
landfills, we provide financial assurance by depositing cash into restricted trust funds or escrow accounts for
purposes of settling final capping, closure, post-closure and environmental remediation obligations. Balances
maintained in these trust funds and escrow accounts will fluctuate based on (i) changes in statutory requirements;
(ii) future deposits made to comply with contractual arrangements; (iii) the ongoing use of funds for qualifying
final capping, closure, post-closure and environmental remediation activities; (iv) acquisitions or divestitures of
landfills and (v) changes in the fair value of the financial instruments held in the trust fund or escrow accounts.
As of December 31, 2015 and 2014, we had $105 million and $171 million, respectively, of restricted trust and
escrow accounts, which are primarily included in “Other assets” in our Consolidated Balance Sheets. See Note
20 for additional discussion related to restricted trust and escrow accounts.
Investments in Unconsolidated Entities
Investments in unconsolidated entities over which the Company has significant influence are accounted for
under the equity method of accounting. Investments in entities in which the Company does not have the ability to
exert significant influence over the investees’ operating and financing activities are accounted for under the cost
method of accounting. The following table summarizes our equity and cost method investments as of
December 31 (in millions):
2015 2014
Equity investments ..................................... $186 $228
Cost investments ....................................... 174 180
Investments in unconsolidated entities .................. $360 $408
We monitor and assess the carrying value of our investments throughout the year for potential impairment
and write them down to their fair value when other-than-temporary declines exist. Fair value is generally based
89