Frequently asked questions

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Water accounting

What is water accounting?

Water accounting is a systematic process of identifying, recognising, quantifying, reporting, and assuring:

  • information about water
  • the rights and other claims to that water, and
  • the obligations against that water.
Why do we need water accounting?

Water accounting ensures that adequate measurement, monitoring and reporting systems are in place.

Effective water accounting should:

  • improve understanding of how water resources are sourced, managed, shared and used improve public and investor confidence in the amount of water traded, consumed, recovered and managed for environmental and other public benefit outcomes
  • inform users' decisions about the allocation of resources.
How does water accounting compare with financial accounting?

There are similarities between water accounting and financial accounting, including:

  • both types of general purpose accounting reports provide quantitative and qualitative information about the entity being reported on
  • providing both 'cash' (or, in water accounting terms, 'physical flow') and 'accrual' accounting reports
  • use of double-entry accounting to ensure reliability.

There are also important differences. In particular, in water accounting:

  • Users include multiple stakeholders for making and evaluating decisions about water.
  • The primary unit is water volume, rather than monetary currency.
  • Water report entities can be geographic regions or water systems as well as organisations.
  • There is likely to be a distinction between the water report entity (such as a particular catchment) and the report preparer (such as a water authority).
  • There is greater variation in the accuracy of water data, particularly where data modelling and estimation is necessary for quantification.
  • Comparative data for several years may be needed to interpret results.
  • Disclosing compliance with water management plans may be useful for discharging management accountability.
What is the difference between an asset and a water asset?

In general terms, an asset is a resource that provides a future benefit, while a water asset is specifically water or a claim on water that provides a future benefit.

For example, where a dam full of water exists, the dam itself might be considered an asset and the stored water behind the dam a water asset.

What is the difference between the System of Environmental-Economic Accounting for Water (SEEA-Water) and Australian Water Accounting Standard 1(AWAS 1)?

SEEA-Water provides a framework for organising economic and hydrological information to enable consistent analysis of the contribution of water to the economy and its impact on water resources.

AWAS 1 sets out the requirements to prepare and present water information in a comparable format to assist report users in making and evaluating decisions about the allocation of resources.

There are several commonalities between SEEA-Water and AWAS 1. For instance, the data required to prepare both accounts are similar. The concept of stocks and flows is central to both standards. Changes in stocks between the start and end of the accounting period are fully reconciled by the flows occurring within the period. However, each standard results in reports with different reporting categories, styles and components.

General Purpose Water Accounting Reports (GPWAR)

What are General Purpose Water Accounting Reports GPWAR?

GPWAR are reports prepared in the format defined in the Australian Water Accounting Standard 1 (AWAS 1).

GPWAR include the following components:

  • Contextual Statement
  • Accountability Statement
  • Statement of Water Assets and Water Liabilities
  • Statement of Changes in Water Assets and Water Liabilities
  • Statement of water flows
  • Note disclosures

GPWAR are prepared on an accrual basis. This accounting method recognises the transactions and events when the decisions or commitments that give rise to them occur, rather than when the water flow happens.

The statement of water assets and water liabilities and statement of changes in water assets and water liabilities are based on accrual reporting. These statements adjust for future outflows or inflows currently attributable to the water report entity.

The statement of water flows reports on a physical flow when it actually happens. This informs users about the flows that have actually occurred over the reporting period.

For example, when an allocation announcement is made, the water report entity recognises the volume of water allocation as an outflow at the announcement date. This obligation is shown on the statement of changes in water assets and water liabilities and on the statement of water assets and water liabilities. It is not shown in the statement of water flows until the allocated water has been taken or delivered.

Who will prepare General Purpose Water Accounting Reports?

The organisation primarily accountable for the management of the water report entity will usually be the most appropriate report preparer.

A water entity is a broad concept encompassing any entity that interacts with water (geographic or administrative). For example, a catchment, a river or an organisation that holds transfers or has rights to water would both meet the definition in the standards.

A water entity is deemed to be a water report entity where there are users who depend on the GPWAR for information to make or evaluate decisions about the allocation of resources. The level of interest in each entity (based on its financial, social and environmental significance) determines whether that entity is also a water report entity.

Who will use general purpose water accounting reports (GPWAR)?

There are many potential users of GPWARs, including:

  • water users (environmental, agricultural, urban, industrial and commercial)
  • investors in water-dependent enterprises and related parties, such as lenders, creditors, suppliers, insurers and water traders and water brokers
  • government representatives and their advisors, including water-related economic, environmental and social policy makers
  • water industry regulators
  • water managers, including environmental water managers and water service providers, interested in other water entities
  • groups and associations with water-related interests
  • water industry consultants
  • academics
  • the general public
Should general purpose water accounting reports (GPWAR) cover volumetrics, water quality, and financial issues such as water cost, market value and trade?

GPWARs for water report entities prepared according to Australian Water Accounting Standard 1 (AWAS 1) will need to include volumetric information in the water accounting statements on both a physical flow basis (in the statement of water flows) and an accrual basis (in the statement of water assets and water liabilities, and the statement of changes in water assets and water liabilities).

GPWAR preparers may need to disclose other information, such as flow rates, either in the note disclosures or the contextual statement.

It is not expected that preparers will separately account for differing levels of water quality (though disclosures may be included). The quality of reported volumes must be of appropriate for their intended use, or 'fit for purpose'.

Financial information does not form part of the water accounting statements, however financial information—such as trading price—may be included in the note disclosures or the contextual statement.
Importantly, AWAS 1 sets out minimum reporting requirements. Preparers are encouraged to disclose any additional information that is relevant to users.

Where the Australian Water Accounting Standards do not address the reporting and disclosure of items, preparers should refer to the Water Accounting Conceptual Framework for further guidance.

What is the difference between a water report entity and a preparer of a General Purpose Water Accounting Report (GPWAR)?

A water report entity is a water entity (geographic region, water system, organisation) which requires a GPWAR to be prepared. The report preparer is the organisation or person responsible for preparing the GPWAR.

For example, the GPWAR of a particular geographic region might be prepared by the appropriate State or Territory department.

In some cases, where regions of interest cross political borders, other entities might also be appropriate report preparers (such as the Murray–Darling Basin Authority).

The management body primarily accountable for the water report entity will usually be the most appropriate report preparer.

However, in the case of highly aggregated water reports, one organisation may oversee report preparation (such as the National Water Account prepared by the Bureau of Meteorology).

Water Accounting Conceptual Framework

What is the Water Accounting Conceptual Framework?

The Water Accounting Conceptual Framewordk establishes:

  • the nature and scope of water accounting
  • consistent terminology
  • a set of common premises for recognising and quantifying the elements of water accounting reports.

The framework helps report preparers resolve issues on which the standards are silent.

The framework underpins the Australian Water Accounting Standards.

What is the difference between the Water Accounting Conceptual Framework WACF and the Australian Water Accounting Standards?

The framework sets the context necessary for defining standards, but does not define the standards themselves.

The standards include detailed requirements for preparing, presenting and assuring general purpose water accounting reports.

The standards should be your primary source of guidance for preparing and assuring reports. However, sometimes the accounting treatment or disclosure is not prescribed by the standards. If that happens, you can refer to the principles set out in the framework.

Australian Water Accounting Standard 1 (AWAS 1)

What is the Australian Water Accounting Standard 1 (AWAS1)?

AWAS 1 prescribes the basis for preparing and presenting a general purpose water accounting report (GPWAR). It sets out requirements for the recognition, quantification, presentation and disclosure of items in a GPWAR.

The document also includes three appendices: a list of defined terms; illustrative guidance; and a basis for conclusions outlining the discussion and assumptions that informed its development.

Reporting to the Australian Water Accounting Standard 1 (AWAS 1) will cost money. What's in it for my organisation, and who will pay?

General Purpose Water Accounting Reports (GPWAR) prepared in accordance with AWAS 1 could replace a wide range of statutory reporting. Standardised reporting prepared according to the standard should give confidence to water report users and provide useful information on which to base decisions about the allocation of scarce resources.

Some key benefits of AWAS 1 are:

  • reduction of compliance costs
  • consistent reporting
  • process improvements
  • enhancement of stakeholder confidence in organisational reporting

The analysis of the costs and benefits of adopting AWAS1 provides evidence about the advantages of using the standard to guide water accounting.

Australian Water Accounting Standard 2 (AWAS 2)

What is the Australian Water Accounting Standard 2 (AWAS 2)?

AWAS 2 is the standard for assurance of general purpose water accounting reports. Assurance helps to enhance the degree of confidence of users of these reports. Assurance involves a suitably qualified practitioner reviewing the general purpose water accounting report and assessing the extent to which the report has been prepared in compliance with the Australian Water Accounting Standard 1.

Will it be mandatory to subject general purpose water accounting reports to the Australian Water Accounting Standard 2 (AWAS2)?

The water accounting standards are voluntary. However, Australian Water Accounting Standard 1 (AWAS1) requires a general purpose water accounting report to undergo assurance. This means that for full adoption of AWAS1, assurance as detailed in AWAS 2, would be needed.

Does the Australian Water Accounting Standard 2 (AWAS 2) stand-alone?

AWAS 2 was published jointly by the Bureau and the Australian Auditing and Assurance Standards Board. It sits under Australian Standard Assurance Engagement 3000 (ASAE 3000): Assurance Engagements Other than Audits or Reviews of Historical Financial information. ASAE 3000 establishes a broad framework for assurance engagements other than ‘traditional’ audits and reviews of historical financial information.

Who can perform an assurance engagement on a general purpose water accounting report?

Assurance engagements of general purpose water accounting reports can be performed by a broad range of practitioners including professional accountants, engineers and hydrologists.


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