1. The Environment Institute Where ideas grow Water Accounting An Australian perspective Mike Young Executive Director, The Environment Institute

2. The Environment Institute Life Impact The University of Adelaide Mistakes Australia made Massive water accounting errors in allocation system – Left lots of uses out of the allocation system – Forgot about ground – surface and overland flow connectivity – Forgot about return flows Political drive for water use efficiency caused massive over-allocation problems – Markets increased productivity faster than any one thought possible – But dramatically increased water use Allocation systems must have hydrological integrity

3. The Environment Institute Life Impact The University of Adelaide Stream inflows to dams Rainfall Stream inflows to dams Rainfall

4. The Environment Institute Life Impact The University of Adelaide Users Environment River Flow Environment River Flow Users With 10% less rainfall

5. The Environment Institute Life Impact The University of Adelaide Stuff farmers hate Every use, every off-take should be metered and you should have to pay for the water you take Only allocate water that exists As water efficiency increases, plan for allocations to go down Allow water to move to industry and to the environment Plan for supply infrastructure redundancy

6. The Environment Institute Life Impact The University of Adelaide Robust design Water accounting The world does not have “a coherent, co- ordinated, consistent body of doctrine” Paton and Littleton Purpose of accounts – Improved decision making – Facilitate understanding – Enable evaluation and review Beneficiaries – Those who depend upon the performance of the described system

7. The Environment Institute Life Impact The University of Adelaide Financial accounting insights Aim to maximise the probability that the company will continue to operate for ever Focus on honest disclosure Focus on outcomes not inputs Terminology – Exchange rates – Consolidated accounts (No double counting) – Liabilities – Disclosure – Performance ratios Account types – Management – Reporting

8. The Environment Institute Life Impact The University of Adelaide The Great Depression => Misleading accounts – lead, in turn, to unreasonable optimism; and ultimately a crash worse than expected Profession started to – Codify principles – Increase consistency – Reduce diversity in approaches

9. The Environment Institute Life Impact The University of Adelaide History of Accounting Structures used in financial accounting began in Italy in C13 & C14 1936 USA produced a terminology bulletin 1959 reorganised to identify – Basic postulates – Broad principles – Rules to guide application 1970s objectives and concepts developed 1990s lowest common denominator international standards 2000s outcome-focused standards set internationally – Consensus approach abandoned

10. The Environment Institute Life Impact The University of Adelaide Key concepts Types of accounts – Management information – Reporting to stakeholders Reporting responsibilities – Obligation to communicate to those with limited access to information; and limited ability to interpret it – A single investment decision is more significant for a small investor Timeliness – Commitment to report by a set date – Control axiom – rule off books at a date

11. The Environment Institute Life Impact The University of Adelaide Ideas from Accounting Doctrines – Disclosure doctrine Principles – The Accounts must balance Conventions – Objectivity (the truth) Standards – Accrual v’s cost Assumptions - – Materiality (Only record contracted activity not MOU’s, announced intentions, etc) – Ongoing concern

12. The Environment Institute Life Impact The University of Adelaide Robust design Account Consolidation Difficult Tasks – Elimination of inter-entity transactions – Isolation of links to other entities – Reclassification of data Protocols – Two types standardised statements critical Assets and liabilities (stock accounts) Transactions (Flow accounts)

13. The Environment Institute Life Impact The University of Adelaide Consolidated (Nested) Water Accounts High Security Pool General Security Pool High Security Pool General Security Pool Management Zone Regulated Surface Water Aquifer Basin/Catchment Management Zone

14. The Environment Institute Life Impact The University of Adelaide Robust design International Accounting Standards Committee National Accounting Standards Board IAS Standards National Standards Accounting Bulletins Accounting Interpretations Standards Interpretation Committee Urgent Issues Group UIG Abstracts 15 Day Disallowance Federal Parliament Sources of Authority

15. The Environment Institute Life Impact The University of Adelaide Robust design Scope 4 Structure 1 Water accounting definition 2 Reporting entity definition 3 Objectives 5 Elements 6 Basis of recognition 7 Basis of measurement 8 Techniques of measurement 9 Allocation Balance (Over-allocated Solvent?) 10 Storage Account Reserves 11 Water use & Flow Account ( – Inflows – outflows – extractions) 12 Compliance reporting (NWI Protocols) 13 Applicability14 Evaluation Principle v’s detail) 15 Research Methodology (due process) 16 Audit requirements 17 Transition policies 18 Monitoring compliance19 Prosecution for non-compliance Conceptual Framework Account preparation Account Presentation Policy change Enforcement A Water Accounting Protocol? Adapted from AARF

16. The Environment Institute Where ideas grow www.adelaide.edu.au/environment www.myoung.net.au