Waste Management Inc.: Accounting Principles | Free Essay Example

Waste Management Inc.: Accounting Principles

Words: 1172
Topic: Environment

Nowadays, all organizations have to use unified accounting concepts to ensure sufficient reporting of their financial transactions.[1] Waste Management Inc. was one of the organizations that violated these standards while being accused of financial manipulations and fraud. In this instance, reviewing its accounting principles can help understand the actual financial process with the help of a real-life example.[2]

Consequently, the primary goal of this paper is to discover the credibility and flexibility of Waste Management Inc.’s policies and summarize them. At the same time, it will be essential to compare the accounting principles of the enterprise with its competitors, including Stericycle and Waste Connections.

The main concepts and ideas of accounting in Waste Management Inc. are presented in the annual report of the company. Broadly speaking, the enterprise refers to U.S. Generally Accepted Accounting Principles (GAAP) while making them the core of the company’s reporting and decision-making.[3]

In this case, the matters highlighted in the financial statements cover information about its assets, estimates, assumptions liabilities, equities, interests, goodwill, revenues per each product line, operating income, earning per share, securities, cash flows, and acquisitions.

To ensure effective financial management, the enterprise has a well-developed mechanism of financial control procedures.[4] It assists the company in minimizing the possibility of fraud and efficient and continuous risk assessment.

It could be said that Stericycle and Waste Connections also prioritize the importance of GAAP as the key element of their accounting principles, but, simultaneously, they also actively employ non-GAAP financial measures to ensure the accuracy and review their financial performance from dissimilar angles.[5], [6] Waste Management should take advantage of these financial tools to review its measures and maximize profits constantly.

When constructing financial statements, the management of the company refers to a plethora of estimations and assumptions. These subjective measures define the overall flow of financial assets, equities, and landfills and long-lived assets impairments.[7]

Similar aspects are reflected in the reports of the competitors, as they help determine any upward and downward shifts in financial performance.[8], [9] Apart from their high degree of flexibility, this part of financial policies is essentiality, as it establishes a sufficient credible basis for discussion of the subsequent states of income and expenditure.

Another critical component to be considered is a fair value that indicates the values of the assets to be gained from selling them to the market participants. In the context of the selected company, the fair value is determined at the date of acquisition and considers any differences after all obligations are repaid.[10]

It could be said that the ability of the policies to take into account these potential differences and contingency ensures their credibility. Nonetheless, implying that some assets’ fair value is dependent on the actual acquisition date questions the realistic nature of these projections while connecting them to a negative evaluation methodology.

As for the competitors, they also tend to use a similar approach to determine fair value by highly referring to the initial price of the acquisition. Nonetheless, this aspect is mostly considered as an estimation, and adjustments are necessary.

In this case, to determine the actual fair value of intangible assets, Stericycle applies cost-saving and discounted income strategies, while Waste Connections relies on an excess earning strategy solely.[11], [12]

Using these methods makes the accounting principles of the rival firms reliable and flexible simultaneously, as they are able to take into account not only the concepts of GAAP but also the fluctuations of the economic environment.

Waste Management has to discover the beneficial nature of these aspects and revise its existent internal financial mechanism to optimize its profits.

When addressing the policies concerning intangible assets, it is vital to review standards regarding goodwill. This asset can be defined as an excess of financial resources after the acquisition of particular assets.[13] In this case, the company evaluates the impairment of goodwill once a year, while other assets such as licenses are amortized by approximately 150% since the initial purchase.[14]

Having a possibility to select the most appropriate amortization method increases the flexibility of the business operations and its responsiveness to risks. Nonetheless, simultaneously, it makes it dependent on the subjectivity of the estimations.

Speaking of the rival firms, both Stericycle and Waste Connections evaluate it annually for each manufacturing unit, but they refer to various strategies such as income and market methodologies to comply with the reality and diminish bias.[15], [16]

As for long-lived asset impairments, they are completed in accordance with GAAP standards, and it implies that these evaluations are entirely credible while having both supporting qualitative and quantitative statements, as reflected in the financial reports of competitors and the company.

Lastly, it is vital to review a revenue recognition mechanism, as it is one of the essential matters that assist in understanding a company’s financial performance. In this instance, the enterprise vehemently refers to the authoritative guidance by the FASB.[17] In Waste Management Inc., the revenues are generated from collecting fees for services to optimize waste management and sales of landfill operations.

The value of the fee covers associated charges and production costs, such as indirect and direct ones.[18] Nonetheless, to ease the process of recognition, the fees are considered as revenue after the completion of the service. Relying on this method makes the revenues well-defined while increasing the possibility of creating forecasts for subsequent financial quarters.

It entirely complies with the methods used by competitors, as they also consider them after the completion of the service.[19], [20] Overall, it could be said that Waste Management Inc. vehemently improved its accounting procedures and increased their credibility to avoid legal suits and accusations in the recent future. Nonetheless, it has to discover the internal financial mechanisms of competitors and adjust its measures to comply with the fluctuations of the environment.


Albreight, S., Albreight, C., Albreight, C., & Zimbelman, M. (2015). Fraud examination. Boston, MA: Cengage Learning.

Palepu, K., & Healy, P. (2012). Business analysis valuation: Using financial statements. Boston, MA: Cengage Learning.

Stericycle. (2015). Annual report 2015.

Waste Connections, Inc. (2015). Annual report 2015.