Waste Management 2015 Annual Report Download - page 99

the statement of financial position. This eliminates the guidance to separate deferred income tax liabilities and
assets into current and noncurrent amounts in the statement of financial position. The amendments to the
authoritative guidance associated with deferred income taxes were effective for the Company on January 1, 2016;
however, early adoption was permitted. The Company’s early adoption of this guidance in 2015 was applied
retrospectively and did not have a material impact on our consolidated financial statements.
Critical Accounting Estimates and Assumptions
In preparing our financial statements, we make numerous estimates and assumptions that affect the
accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. We must make
these estimates and assumptions because certain information that we use is dependent on future events, cannot be
calculated with precision from available data or simply cannot be calculated. In some cases, these estimates are
difficult to determine, and we must exercise significant judgment. In preparing our financial statements, the most
difficult, subjective and complex estimates and the assumptions that present the greatest amount of uncertainty
relate to our accounting for landfills, environmental remediation liabilities, asset impairments, deferred income
taxes and reserves associated with our insured and self-insured claims. Each of these items is discussed in
additional detail below. Actual results could differ materially from the estimates and assumptions that we use in
the preparation of our financial statements.
Landfills
Accounting for landfills requires that significant estimates and assumptions be made regarding (i) the cost to
construct and develop each landfill asset; (ii) the estimated fair value of final capping, closure and post-closure
asset retirement obligations, which must consider both the expected cost and timing of these activities; (iii) the
determination of each landfill’s remaining permitted and expansion airspace and (iv) the airspace associated with
each final capping event.
Landfill Costs — We estimate the total cost to develop each of our landfill sites to its remaining permitted
and expansion capacity. This estimate includes such costs as landfill liner material and installation, excavation
for airspace, landfill leachate collection systems, landfill gas collection systems, environmental monitoring
equipment for groundwater and landfill gas, directly related engineering, capitalized interest, on-site road
construction and other capital infrastructure costs. Additionally, landfill development includes all land purchases
for the landfill footprint and required landfill buffer property. The projection of these landfill costs is dependent,
in part, on future events. The remaining amortizable basis of each landfill includes costs to develop a site to its
remaining permitted and expansion capacity and includes amounts previously expended and capitalized, net of
accumulated airspace amortization, and projections of future purchase and development costs.
Final Capping Costs — We estimate the cost for each final capping event based on the area to be finally
capped and the capping materials and activities required. The estimates also consider when these costs are
anticipated to be paid and factor in inflation and discount rates. Our engineering personnel allocate landfill final
capping costs to specific final capping events. The landfill capacity associated with each final capping event is
then quantified and the final capping costs for each event are amortized over the related capacity associated with
the event as waste is disposed of at the landfill. We review these costs annually, or more often if significant facts
change. Changes in estimates, such as timing or cost of construction, for final capping events immediately impact
the required liability and the corresponding asset. When the change in estimate relates to a fully consumed asset,
the adjustment to the asset must be amortized immediately through expense. When the change in estimate relates
to a final capping event that has not been fully consumed, the adjustment to the asset is recognized in income
prospectively as a component of landfill airspace amortization.
Closure and Post-Closure Costs — We base our estimates for closure and post-closure costs on our
interpretations of permit and regulatory requirements for closure and post-closure monitoring and maintenance.
The estimates for landfill closure and post-closure costs also consider when the costs are anticipated to be paid
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