1. Waste Management (stock ticker: WM) is a publicly traded company that owns and operates hundreds of landfills in North America. Use information in their most recent 10-K filing to answer some questions. Look up the form 10-K filed on February 22, 202 Go to the SEC EDGAR database and enter Waste Management Inc (or stock ticker WM or CIK 823768) in the search bar. Once you select WM, click on the February 22 10-K filing under “Latest Filings”.

• What is the amount that WM reports as ARO in the 12/31/2020 balance sheet on page 75 (they use the term Landfill and environmental remediation liabilities)? In a sentence or two, what does this amount represent?

Response:

• Environmental remediation liabilities (and AROs more broadly) are recorded at the present value of the estimated future cash outflows (i.e., they are based on cost estimates and interest rate assumptions). During 2020, WM revised the cost estimates and interest rate assumptions used in their calculations. What is the impact of these changes in estimates/assumptions on the amount reported? Provide a dollar amount and indicate whether it is an increase or decrease. Refer to the disclosures on page 54 in the Management’s Discussion and Analysis (MDA) section of the 10-K.

Response:

• (Hypothetical scenario) Assume that in February 2021, WM entered in to a 30-year lease of land to be used for a new landfill. The terms of the contract require WM to restore the land at the end of 30 years to a condition suitable for recreational use. WM has provided the following cash flow possibilities related to the remediation costs. What will WM record as the ARO related to the new landfill? Assume a factor of 0.41199 in present value calculations (n = 30, i = 3%). You may use/edit the table below to show your work.

Response:
Outcome	Future Cash outflow	Probability
A	$14,000,000	30%
B	$12,000,000	60%
C	$10,000,000	10%