Frequently asked questions

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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
• 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
• WASB: Water Accounting Standards Board

How does ED AWAS 1 differ from the PAWAS?

Feedback and practical observations from the PAWAS Pilot Program has resulted in the following changes in ED AWAS 1:

• Significantly more implementation guidance, especially in water assets and water liabilities. This responds to uncertainty by preparers about recognition of those elements.
• Adjustment to the line items required on the face of GPWAR statements.
• Changing the term 'water reporting entity' to 'water report entity' to better describe its nature.
• Inclusion of principles for segment reporting.
• Inclusion of principles for reporting events occurring after the reporting period and prior to report preparation.
• Replacement of term 'water use', with 'water for environmental, social and cultural, and economic benefits'.
• Inclusion of principles for reporting prior period errors.
• Changes to the Accountability Statement to separate the requirements of the preparer and those charged with management responsibility for the water resources.
• Inclusion of a principle for reporting an 'unaccounted for difference'.
• Inclusion of principles for disclosure of items that meet the definitions of water assets and water liabilities, but cannot be quantified with representational faithfulness.

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 a practical and useable standard enabling 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.

Some of the concepts and principles in ED AWAS 1 will take time to absorb.

Issuing AWAS1 as an ED allows:

• the ED to be used by report preparers and any reporting or requirement issues can be addressed and resolved before a standard is issued
• a formal feedback process for comments prior to WASB recommending AWAS 1 to the Director of Meteorology for issue
• early adopters to broaden industry exposure to water accounting.

How long will AWAS 1 exist in ED form?

Water accounting is an emerging discipline. WASB intends to expose the ED AWAS 1 to the water accounting industry for up to two years. This will allow WASB to obtain extensive feedback and for information systems to be developed that will assist in the preparation of GPWAR.

What is the cut off date for formal comment and feedback?

A number of specific questions have been posed in the ED AWAS 1 accompanying document. WASB would like responses by the end of January 2011. Additional constructive feedback, particularly if it is based on practical application of ED AWAS1, is welcome until December 2011.

Will ED AWAS 1 be adjusted according to comments? How will that occur?

All comments will be considered in the light of their implications for ongoing application of AWAS 1. We will establish a process of communicating any proposed changes before an Australian Water Accounting Standard is issued. We do not intend to make changes to ED AWAS 1 during its exposure period.

When will an Assurance Standard become available?

We will work with the Auditing and Assurance Standards Board (AUASB) to develop an assurance Standard to be known as AWAS 2. This is likely to occur during the exposure period of the ED AWAS 1. AWAS 2 will also be exposed for comment and testing.

Does WASB expect water report preparers to commence using ED AWAS 1 for their reporting or should they wait until AWAS 1 is issued?

We encourage water report preparers to consider early adoption and application of ED AWAS 1.

We are confident from testing and development work over the past two years that ED AWAS 1 can be applied by report preparers for their GPWAR and will not need substantive changes in the short term.

Evolution of the standards, and development of systems and capacity within organisations to apply these standards, will benefit from early exposure to the ED AWAS 1.

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, then the ED AWAS 1 will be of interest to your organisation. 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 the financial reports of your organisation.

Will it be mandatory to prepare reports to ED 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.

Significant further testing of the ED AWAS 1 will occur over the next two years, including through the National Water Account.

The mandating of adoption of AWAS 1, when issued, is ultimately a matter for Australian governments to consider once the value of GPWARs 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.

Hence, some of the key benefits of AWAS 1 are:

• reduction of compliance costs
• enhancement of stakeholders' confidence in your reports

We will undertake a detailed analysis of existing statutory reporting requirements as part of a comprehensive cost benefit analysis while the AWAS 1 is in Exposure Draft form.

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.

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 across Australia.

Effective water accounting should:

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

What are GPWAR?

GPWAR are reports in a consistent format as defined in the AWAS 1.

GPWAR include the following components:

• Contextual Statement
• Accountability Statement
• Assurance Statement
• Statement of Water Assets and Water Liabilities
• Statement of Changes in Water Assets and Water Liabilities
• Statement of Physical Water Flows
• Note disclosures

GPWAR are prepared on both a physical flow and accrual basis.

The physical flow report (Statement of Physical 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 shown on the Statement of Changes in Water Assets and Water Liabilities, and therefore the Statement of Water Assets and Water Liabilities as well.

It is not shown in the Statement of Physical Flows until the allocated water has been taken or delivered.

Who will prepare GPWAR?

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.

Identification of water report entities will be an ongoing process. However, any preparer that wishes to report to a group of external stakeholders and its management to the ED AWAS 1 or AWAS 1 when issued, can deem its water entity as a water report entity and prepare a GPWAR.

Who uses GPWAR?

Because water is so important in Australia, 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 GPWAR 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 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 ED AWAS 1 should be conducted in accordance with the principles in the WACF.

Why might water report entities be other than water authorities?

GPWAR provide useful information for decision-making.

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

So that reports to meet these needs can be created, we have not restricted the definition of water report entities to a particular type of entity.

Therefore, while water authorities may well be water-reporting entities, 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 of which it is reasonable to expect GPWAR will be required, 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 do 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 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).

As a guide, 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 NWA).

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

When will water accounting standards be issued?

The WACF is now available for download.

The PAWAS was released in July 2009 for use by preparers of GPWARs and for the Methods Pilot for the NWA, and is also available for download.

Public comments on both these documents, were considered before releasing the ED AWAS 1 in October 2010. It is expected that AWAS 1 will be exposed for up to 2 years before finalisation and issuing.

When will water accounting standards apply?

The exposure draft of the AWAS will apply to preparing the NWA in 2010.

Significant further testing of the exposure draft AWAS will occur before the WASB considers making the standards mandatory.

Will there be an opportunity to comment on future water accounting standards?

You have the opportunity 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 will continue.

The WASB will distribute future draft standards for comment before finalising them.

Targeted stakeholders will evaluate future draft standards before we invite wider public comment.

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 WACF and AWAS, might also include supplementary information to the accounts in order 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 WACF?

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

The AWAS include detailed requirements for preparing and presenting GPWARs.

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

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.

In contrast, the ED AWAS 1 set out the nationally applicable requirements for the preparation and presentation of GPWARs.

What are the differences between black-letter and grey-letter text in AWAS 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.

What is the difference between water accounting and financial accounting?

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

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

However, 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 (as opposed to the financial accounting focus 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.
• Disclosure of compliance with water management plans may be useful for discharging management accountability.

What are the differences between water report entities and (financial) reporting entities?

Both water report entities and (financial) reporting entities are entities about which users rely on general-purpose reports for decision-making. the legal organisation or person who prepares a GPWAR may be different to 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 been in touch 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.