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When you apply discounting to a future cash payment to arrive at a present value, it then becomes necessary to unwind that discount for each successive year until you arrive eventually at the date of payment. The double entry to unwind (in its simplest form) is Dr Expense – finance costs and Cr the Obligation Account
May 2, 2024 · The unwinding of discount is presented as finance costs (IFRIC 1.8). Given the often significant time gap between the recognition of the provision and the actual decommissioning of a related asset, cumulative discounting expense may exceed cumulative depreciation expense.
Subsequently, the discount on this provision would be unwound over time, to record the provision at the actual amount payable. The unwinding of this discount would be recorded in the statement of profit or loss as a finance cost.
Dec 24, 2020 · Concept of Unwinding of Discount is used whenever an entity incurs a liability for which settlement will be done after a period of 1 year. In this video, con...
Applying paragraph 5.4.1(b) of IFRS 9, an entity calculates interest income on financial assets that have subsequently become credit-impaired by applying the effective interest rate (EIR) to the amortised cost, which is net of any expected credit losses (ECL).
This process is called ‘unwinding the discount’. Each year the liability is increased by the interest rate used in the discounting calculation. This subsequent increase is expensed to finance costs, making the double entry Dr Finance cost, Cr Liability.
• Discount unwind (in P&L) is calculated at locked-in rate at inception/when the claim occurs • Changes in liability are split between inclusion within P&L and OCI 23 September 2019
