Your assignment
Role: Accounting policy manager reviewing a fleet and landfill-asset estimate process after a regulator's enforcement action
Deliverable: A depreciation-estimate control memo containing a sensitivity example, multi-period effect map, claim-status table, and evidence-based review protocol.
Evidence basis: public records
Evaluation criteria
- estimate mechanics (30%): Correctly traces how cost, residual value, useful life, and timing affect depreciation, carrying amount, income, and later-period constraints.
- judgment and claim boundaries (25%): Separates permissible estimation, bias, error, and alleged fraud without deciding intent from an outcome alone.
- multi period analysis (25%): Shows cumulative and reversal effects and identifies how repeated immaterial-looking changes can become material in aggregate.
- control design (20%): Designs independent evidence, approval, back-testing, and aggregation controls tied to estimate risk.
Your role and decision
Your company owns thousands of long-lived collection and disposal assets. The audit committee asks how estimate changes that appear individually plausible could be used to manage earnings over many years. Use the Waste Management enforcement record to design a better review process.
Evidence packet
Use the SEC complaint, keeping its allegations and period in view. Extract the types of accounting practices alleged rather than treating the document as a complete fixed-asset register.
Required work
- Create a transparent $100,000 straight-line example. Compare a supported five-year life and zero residual value with a longer life and positive residual value. Trace annual expense, accumulated depreciation, carrying amount, income, and the constraint created for later periods.
- Explain why changing a useful life or residual value is not, by itself, improper. Identify the operational evidence that would support a current estimate and the evidence that would make bias or override a concern.
- Build a multi-period map of the practices described by the SEC. Distinguish timing shifts from any effect that depends on asset retirement, impairment, disposal, or later correction.
- Design a review protocol covering independent engineering input, approval, back-testing, asset-class aggregation, booked-versus-proposed entries, and communication of passed adjustments.
Constraints
Do not infer intent solely from a favorable estimate or substitute the hypothetical numbers for Waste Management's reported amounts. Avoid the claim that depreciation estimates alter cash paid for an existing asset.
Evaluation
The submission should make estimate uncertainty reviewable: assumptions, evidence, incentives, sensitivity, aggregation, and later outcomes must remain connected.