Issue 13 : Recording of natural
resource depletion
Report on depletion-related
outcomes in the current SEEA
update
SEEA Chapter 10 : Making environmental
adjustments to the flow accounts
Presents five sets of treatment options on depletion:
i. Identifying the income element of resource rent
(for both renewable and non-renewable natural
resource (LG March 07, UNCEEA July 07)).
ii. Recording mineral exploration and mineral
deposits. (LG March 07, UNCEEA July 07)
iii. Recording the additions to and subtractions from
the stock of environmental assets.
iv. Recording ownership of mineral-related assets.
v. Recording depletion-asset recorded in the legal
owner's balance sheet.
Adjustment i.
Income element of resource rent
Resolved at London Group meeting in
Johannesburg, March 2007
ƒ Option A3 - 'Part of resource rent
represents a decline in the value of the
asset and part is income'
ƒ LG agreed this applied to non-renewable
resources
ƒ However, its application to renewable
resources needed clarification
Adjustment i.
Income element of resource rent
Issues Paper presented at London Group
Meeting, Rome, December 2007
ƒ 'Depletion of Renewable Environmental
Resources'
The paper clarified application of Option A3
to renewable resources
Two issues required resolution
When accounting for depletion of renewable
resources used in production in SEEA
accounts,
1. Is natural growth of renewable natural
resources used in production a form of
production?
2. Should depletion of such resources through
use in production be treated as a form of
capital consumption (as a charge against
income)?
Proposed response to issues
1 Natural growth (net of natural mortality) of
renewables used in production be treated
as a form of non-market output in the SEEA
Production account
2 Depletion of renewables used in production
be treated as a form of capital consumption
(consumption of natural capital) in the SEEA
Production account
LG response to the issues
The London Group unanimously accepted
these proposals at its meeting in Rome,
December 2007
Adjustment iii.
Recording changes to the stock of
natural resources
Following the London Group endorsement of the
recommended treatment of accounting for depletion of
renewable resources used in production, consideration
was given to recording changes to the stock of natural
resources.
Issues Paper presented at London Group Meeting,
Rome, December 2007
Proposed response to issues
SEEA presents 3 options for recording
changes to the stock of environmental
assets (SEEA, Chapter 10, Box 10.4).
None of the options in box 10.4 were
considered appropriate for recording
changes to both renewable and nonrenewable environmental assets.
A fourth option, applicable to both renewable
and non-renewable environmental assets,
was proposed.
Proposed Option C4
For non-renewable natural resources the
consequences of extraction are recorded in the
extended generation of income account leading
to a depletion-adjusted operating surplus, but
corresponding increases in these resources are
shown in the other changes in volume of assets
account.
For renewable natural resources, both the
consequences of extraction and net natural
growth are recorded in the extended generation
of income account leading to a depletionadjusted operating surplus.
LG response to the issue
The London Group unanimously accepted
Option C4 at its meeting in Rome, December
2007.
Adjustment iv.
Recording ownership of mineralrelated assets
• Typical conditions of mineral
extraction: legal owner establishes
agreement with extractive enterprise
so that the latter extracts the
resource, earns resource rent, and
pays rentals to the legal owner.
• Agreement typically covers an
extended period of time.
Options to record ownership
• On the balance sheet of legal owner
(SEEA option D2)
• On the balance sheet of extractor
Partition the ownership:
• On the basis of relative share of
expected resource rent receipts
(SEEA option D1)
• Financial lease approach
London Group meeting
December 2007:
• Agreed that the financial lease
approach best describes the
ownership arrangements under
typical resource extraction conditions
- and best explains related rentals
and depletion flows
• Depletion charge should impact on
the production account and balance
sheet of the same entity
Financial lease approach
• Is a complex solution
• Is not the approach suggested by
1993 SNA Rev.1 (legal owner)
• But SEEA requires a depletion
charge against its production
account, while SNA doesn’t allow this
• SNA solution works for SNA but not
ideal for SEEA
Current status of this work
• London Group meetings were
unanimous in their support for
preferred outcomes
Current status of this work
• But concerns recently raised by a London
Group member during development of
SEEA-E publication
– Treatment of new discoveries of nonrenewable natural resources
– Holding gain/form of income rather than
‘other volume change’ or as the output of a
process of economic production
• Affects LG support for (i), (iii) and (iv)
• Affects UNCEEA support for (i)
Current status of this work
• Also, LG decisions depart from SNA
– Income element treatment for renewables
extends the production boundary
• In SNA, purely natural growth is part of production
but only if that growth is under the direct ownership
and control of a producing unit. eg fish growth in a
fish farm, or timber growth in a plantation forest is
SNA production. Timber growth in a native forest is
not SNA production.
– Ownership treatment is contrary to SNA
Current status of this work
• Discussions will continue to allow
response to these concerns
SEEA Chapter 10 :
Making environmental adjustments to the
flow accounts
i.
Identifying the income element of resource rent (for
both renewable and non-renewable natural
resource (LG March 07, Dec 07, Decision point UNCEEA July 07, Progress
report UNCEEA July 08)
ii. Recording mineral exploration and mineral
deposits. (LG March 07, UNCEEA July 07)
iii. Recording the additions to and subtractions from
the stock of environmental assets. (LG Dec 07, Progress
report UNCEEA July 08)
iv. Recording ownership of mineral-related assets. (LG
Dec 07, Progress report UNCEEA July 08)
v. Recording depletion-asset recorded in the legal
owner's balance sheet.