Question

Waste companies have great latitude in setting reserves (liabilities) for future environmental costs at their dumps. The process involves estimating how high the costs will be 30 years or more in the future and calculating how big a fund is needed in today's dollars to satisfy the future obligation. For example, Waste Management Inc., previously accused of using aggressive accounting methods, once recorded a $173.3 million cost that lowered its third-quarter profit by 63 percent. The cost included $45 million to boost cleanup reserves for some dumps, $26 million to increase reserves for litigation, and $72.3 million to boost reserves for future claims. What are some of your thoughts on how to evaluate how high the liabilities should be? Be sure to include both long-term and short-term thoughts in your answer. What would the impact look like if the depreciation life on its equipment were changed to 15 from 10 years?

Answer 1

Waste Management in today time has great impact on companies working as if corporate remain unaware of cost then they would have to pay more cost for same.

1. Long term perspective for waste cost management :-

We might feel that Project are unacceptable if we took into consideration the cost of Waste recycle because it will impact our profitability to the greater extend .

But if we consider the larger impact of same on human kind then the entire sinerio would be quite different as we will long forward and go with decision that would impact our society at large

the change in depreciation rate from 15 year to 10 year will come increase our depreciation our life of the cost.

Short term measures are also important because waste means that resources are misutilized and which need to be controlled.