Frequently asked questions

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Water accounting

What do the abbreviations stand for?

You may see the following abbreviations used in discussions about water accounting:

  • ABS: Australian Bureau of Statistic
  • AUASB: Auditing and Assurance Standards Board
  • AWAS: Australian Water Accounting Standard
  • AWAS 1: Australian Water Accounting Standard 1
  • AWAS 2: Australian Water Accounting Standard 2
  • ED AWAS 1: Exposure Draft of Australian Water Accounting Standard 1
  • GPWAR: General Purpose Water Accounting Report
  • IASB: International Accounting Standards Board
  • IRWS: International Recommendations for Water Statistics
  • ISO: International Organization for Standardization
  • NWA: National Water Account
  • NWI: National Water Initiative
  • PAWAS: Preliminary Australian Water Accounting Standard
  • SEEA: System of Integrated Environmental-Economic Accounting
  • SEEAW: System of Environmental-Economic Accounting for Water
  • SWAC: Statement of Water Accounting Concepts
  • WACF: Water Accounting Conceptual Framework for the Preparation and Presentation of GPWAR General Purpose Water Accounting Reports
  • WASB: Water Accounting Standards Board
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:

  • inform users' decisions about the allocation of resources
  • improve public and investor confidence in the amount of water traded, consumed, recovered and managed for environmental and other public benefit outcomes
  • improve understanding of how water resources are sourced, managed, shared and used.
What is the difference between water accounting and water reporting?

The terms water accounting and water reporting are sometimes used interchangeably.

Technically, however, water accounting refers to the preparation and reporting of water accounting reports. The preparation and presentation of a GPWAR is a form of water accounting.

A report prepared for a water report entity, prepared in accordance with the Water Accounting Conceptual Framework and Australian Water Accounting Standards, might also include supplementary information to the accounts to further inform users regarding the operations of the entity.

Supplementary information might include projections, estimates or other disclosures that management considers useful, but which fall outside the scope of GPWAR.

Water reporting may also refer to the preparation of water reports other than GPWAR.

What is the difference between water accounting and financial accounting?

Australian water accounting seeks to leverage the experience of the financial accounting community. There are similarities between the proposed water accounting model and existing financial accounting requirements, including:

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

Given the nature of water accounting, there are also important differences. In particular, in water accounting:

  • Users include multiple stakeholders for making and evaluating decisions about water (in financial accounting the focus is on providing information to investors for economic decision-making).
  • The primary unit of account is water volume rather than monetary currency (though details of water trading may ultimately be required to be disclosed).
  • Water report entities will often be geographic regions or water systems rather than 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 significant variation in the accuracy of water data, particularly when extensive 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 are the differences between water report entities and (financial) reporting entities?

In the case of water report entities and (financial) reporting entities, users rely on general-purpose reports for decision-making. The legal organisation or person who prepares a GPWAR may differ from the water report entity for which users need information for decision-making.

The definition of water report entities is set out in the WACF.

The definition of (financial) reporting entities is set out in International Accounting Standards Committee (IASC) Framework for the Preparation and Presentation of Financial Statements (paragraph 8). The Corporations Act (2001) prescribes specific financial reporting obligations for Australian companies.

What is the difference between an asset and a water asset?

In general terms, an asset is anything 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.

Economic assets must be disclosed in financial accounts, and water assets must be disclosed in water accounts.

Is there an international standard setting regime for water accounting along the lines of international accounting standards?

No. While there has been international development in standards for water statistics (see "How does this work compare to that being produced by the ABS"), Australia is the only country developing standardised water accounting on this basis. That is, it is the only country at the moment planning to produce General Purpose Water Accounting Reports in accordance with Water Accounting Standards, underpinned by a Water Accounting Conceptual Framework, and prepared on an accrual basis using double entry accounting.

WASB has consulted with representatives of the International Accounting Standards Board during the development of the WACF and the PAWAS. Furthermore, we are aware that independent of WASB activities, discussions are occurring internationally regarding potential adoption of the standardised water accounting being produced by WASB.

How does this work compare to that being produced by the ABS

As noted in "Is there an international standard setting regime for water accounting along the lines of international accounting standards?", there has been considerable international development in water statistics. The United Nations Statistical Division has produced International Recommendations for Water Statistics (IRWS) and an international statistical standard the System Integrated Environmental-Economic Accounting (SEEA), including a specific standard for Water (SEEA-W). The SEEA is consistent with the international economic accounting framework, the System of National Accounts. International statistical standards have the endorsement of the international statistical community, are widely used and allow for international comparisons.

Since the late 1990s the Australian Bureau of Statistics (ABS) has produced the Water Account, Australia (ABS catalogue no. 4610.0). The ABS Water Account uses the IRWS and SEEA-W framework. It provides answers to questions such as: who uses water, how much water did they use, and for what purpose, how much is paid for water, who supplied the water and where did the water come from (e.g. surface water and groundwater)?

The ABS Water Account is produced at a National and state and territory level and, where possible, at the regional level. It aims to highlight the drivers, pressures, impacts and responses of environmental and water management policies and practices on water resources. Further information on the ABS Water Account, Australia.

General Purpose Water Accounting Reports (GPWAR)

What are General Purpose Water Accounting Reports GPWAR?

GPWAR are reports in a consistent format as defined in the 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 both a physical flow and accrual basis.

The flow report (Statement of water flows) reports the flows that have actually occurred over the reporting period.

In contrast, the accrual reports (Statement of water assets and water liabilities, Statement of changes in water assets and water liabilities) adjust for future outflows or inflows currently attributable to the entity.

For example, when an allocation announcement is made, the water-reporting entity recognises the volume of water allocation as an outflow at the announcement date.

This obligation is also shown on the Statement of changes in water assets and water liabilities, and therefore 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?

Any water entity deemed to be a water report entity be able to have a GPWAR prepared for it. The preparer of the GPWAR will depend on the administrative arrangements governing the water report entity.

A water entity is a broad concept encompassing any entity that interacts with water (geographic or otherwise). For example, a catchment, a river or a particular reach of a river would each meet the definition of a water entity, such as an Environmental Water Holder, as would an organisation that holds transfers or has rights to water.

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.

Water report entities have users that depend on GPWARs to help them make decisions.

Identifying water report entities is an ongoing process. Any preparer wishing to report to a group of external stakeholders and its management to the Australian Water Accounting StandardsAWAS 1, can deem its water entity as a water report entity and prepare a GPWAR.

Who uses General Purpose Water Accounting Reports?

There are many diverse users of GPWAR, 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, who may be interested in water entities other than themselves
  • groups and associations with water-related interests
  • water industry consultants
  • academics
  • interested citizens.
Should General Purpose Water Accounting Reports cover volumetrics, water quality, and financial issues such as water cost, market value and trade?

GPWARs for water report entities prepared according to ED AWAS 1 will need to include volumetric information in the water accounting statements on both a physical flow basis (in the Statement of Physical 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.

We do not expect preparers to separately account for differing levels of water quality (though disclosures may be included). The water quality of reported water volumes must be of appropriate quality 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 set out minimum reporting requirements. Preparers are encouraged to disclose additional information that they believe is relevant to users.

WASB expects more detailed disclosure and accounting requirements to emerge, to the extent that users require them.

The reporting and disclosure of items not addressed by the AWAS 1 should be conducted in accordance with the principles in the WACF.

Why might water report entities be other than water authorities?

There is a wide diversity of users of GPWAR. Their information needs are also diverse.

To create reports that meet these needs, we have not restricted the definition of water report entities to a particular type of entity.

Water authorities may be water-reporting report entities, but other entities such as regions, organisations or individuals, and particularly physical entities such as regions and water systems, may also be water report entities if users require information on that entity for decision-making.

For example, while Sydney Water is a water-reporting entity which may reasonably be expected to prepare a GPWAR, the State of New South Wales may also be obliged to produce a GPWAR that includes the water managed by Sydney Water.

What do I prepare if my organisation is a water report entity and its area overlaps with another water report entity?

It is possible for water report entities, physical or organisational, to overlap.

Exactly which reports are prepared depends on users' needs.

In the example of the Murray-Darling Basin, each state might prepare a GPWAR for the part of the basin located within its borders. In addition, the Murray-Darling Basin Authority might prepare a consolidated GPWAR of the whole basin.

Each GPWAR must comply with the requirements of AWAS 1 and the WACF.

What is the difference between a water report entity and a preparer of a GPWAR?

A water report entity is a water entity (geographic region, water system, organisation or individual), which is required to prepare a GPWAR.

The report preparer is the organisation or person responsible for preparing the GPWAR.

For example, the water accounts 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 entity which is primarily accountable for the management of 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 Bureau of Meteorology in the preparation of the National Water Account).

What is the difference between statements and reports?

The term statements is often synonymous with accounts. Therefore, a report (i.e. a GPWAR) prepared for a water report entity will include information such as in a contextual statement and disclosure notes, that is supplementary to the information in the water accounting statements

Water Accounting Conceptual Framework (WACF)

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.

Standards developers are the main users of the WACF. However, the framework may also help report preparers to resolve issues on which the standards are silent.

The WACF underpins the PAWAS and ED AWAS 1.

What is the difference between the WACF and ED AWAS 1?

The Framework sets the context required for defining standards, but does not define the standards themselves.

The Standard includes detailed requirements for preparing and presenting GPWAR.

If you prepare reports, the AWAS 1 should be your primary source of guidance. However, sometimes the accounting treatment or disclosure you need is not prescribed by AWAS 1. If that happens, you can refer to the principles set out in the WACF.

What are the differences between black-letter and grey-letter text in AWAS 1 and WACF?

Black-letter (bold) paragraphs contain the main principles of the ED AWAS 1 and WACF. It is essential to follow these paragraphs.

Grey-letter paragraphs:

  • provide illustrative guidance on the application of black-letter principles
  • are explanatory rather than mandatory
  • are intended to help preparers interpret the black-letter paragraphs
  • contain elaboration on key principles, examples and references to other relevant standards.

Australian Water Accounting Standard 1 (AWAS 1)

Why is AWAS 1 released as an Exposure Draft (ED)?

Release of ED AWAS 1 is an important milestone in the evolution of water accounting standards.

WASB are confident that AWAS 1 will be practical and useable and enable preparation of GPWAR for all types of water entities. However, water accounting is a new discipline and water accounting report users may need time to prepare for using a standard.

Issuing AWAS1 as an ED allowed:

  • the ED to be used by report preparers which assisted in identifying any reporting or requirement issues before a standard is issued the release of AWAS 1
  • for a formal feedback process for comments prior to WASB before recommending AWAS 1 to the Director of Meteorology for its release
  • early adopters to broaden industry exposure to water accounting.
  • to encourage early adoption to the broader water industry.
How does AWAS 1 differ from the ED AWAS 1?
Feedback received through the ED AWAS 1 consultation process resulted in the following changes in AWAS 1:
  • Accountability Statement: WASB agreed to remove the requirements relating to reporting on compliance of externally imposed requirements and best practices from the Accountability Statement
  • Water entity: WASB decided to change the definition of water entity, noting that whilst this simplifies the definition, it doesn’t change the application of it.
  • Water Accounting Statements: WASB elected to allow, under certain conditions, to remove the need to produce both, the Statement of changes to water assets and water liabilities and the Statement of water flows, either by the omission of one of them, or the combination of them.
Will there be an opportunity to comment on future water accounting standards?

There will be opportunities to comment on future water accounting standards.

The standards released to date have been developed through a consultative process, involving many pilot projects across Australia. This process of consultation will continue.

The WASB will distribute future draft standards for comment to targeted stakeholders before we invite wider public comment and finalise them.

While there is no formal feedback process for AWAS 1 and its associated illustrative water accounting reports, we do encourage users to send us feedback for future consideration.

How does AWAS 1 relate to the Bureau's role in developing water information standards?

In consultation with water information practitioners and experts, the Bureau is developing water information standards. The Bureau is also adopting several defined standards and formalised operating practices and procedures developed by the International Organization for Standardization (ISO) and Standards Australia. This will ensure our water information is fit-for-purpose. Under the Water Act 2007 (section 130) the Director of Meteorology has the power to issue water information standards dealing with any of the following:

  • collecting water information
  • measuring water
  • monitoring water
  • analysing water
  • transmitting water information
  • accessing water information
  • retaining and storing water information
  • water accounting
  • any other matter relating to water information that is specified in the regulations.
Does ED AWAS 1 apply to my organisation?

If your organisation currently holds water, or rights or other claims to water, or has management responsibilities for these, AWAS 1 will be of interest. It will also be of interest if your organisation wishes to report to external stakeholders and their management to an agreed standard that ensures written reports that:

  • are consistent and comparable
  • have the same level of confidence for those stakeholders as financial reports.
Will it be mandatory to prepare reports to AWAS 1?

Preparing a report in accordance with AWAS 1, when issued, is not mandatory.

A number of organisations are, however, preparing or planning to prepare GPWAR on a voluntary basis.

Mandating adoption of AWAS 1 is ultimately a matter for the Australian government to consider once the value of GPWAR prepared according to the AWAS 1 has been demonstrated.

Reporting to AWAS 1 will cost money. What's in it for my organisation, and who will pay?

GPWAR prepared in accordance with the AWAS 1 could replace a wide range of statutory reporting and is anticipated to provide confidence for water report users.

Some key benefits of AWAS 1 are:

  • reduction of compliance costs
  • enhancement of stakeholders' confidence in organisational reporting

As part of the standard development process, WASB undertook an effects analysis process to ascertain, to the extent practicable, the costs and benefits of adopting AWAS 1. [Insert link to effects analysis]

What is the difference between AWAS and other water accounting approaches?

Many government departments, agencies and other organisations have developed their own approaches to quantifying and reporting information on water. These might be considered 'water accounting standards' within specific jurisdictions or organisations.

AWAS 1 sets out the nationally applicable requirements for preparing and presenting of GPWAR.

Australian Water Accounting Standard 2 (AWAS 2)

What is the AWAS 2?

The AWAS 2 is an assurance standard which will enhance the degree of confidence of intended report users of general purpose water accounting reports. This is achieved by an assurance practitioner reviewing the general purpose water accounting report and stating if the report has been presented fairly in accordance with AWAS 1.

Will it be mandatory to subject general purpose water accounting reports to the AWAS 2?

Subjecting a general purpose water accounting report to assurance is a requirement of the AWAS 1. But, as the AWAS 1 is a voluntarily standard, it’s not mandatory to obtain assurance.

Who developed the AWAS 2?

The Auditing and Assurance Standards Board and the Bureau of Meteorology through the Water Accounting Standards Board worked jointly to develop the AWAS 2.

Is the AWAS 2 a stand-alone standard or does it sit under an overarching standard?

The AWAS 2 sits under 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 general purpose water accounting reports?

ASAE 3000: Assurance Engagements Other than Audits or Reviews of Historical Financial information applies specifically to assurance practitioners. This enables assurance engagements to be performed by a broader range of practitioners than just professional accountants.

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