Rehabilitation Provision — Unwinding of Discount
Recording the annual increase in the rehabilitation provision due to the passage of time (discount unwinding).
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Finance Cost — Provision Unwinding | Expense (+) | 680,000.00 | - |
| Rehabilitation Provision (Increased) | Liability (+) | - | 680,000.00 |
💡 Accountant's Note
The rehabilitation provision is discounted to present value at inception. As the closure date approaches, the provision increases (unwinds) — the present value converges toward the nominal cost of rehabilitation. This increase is classified as a finance cost (unwinding of the discount), not an operating cost. It is calculated as: opening provision balance × discount rate.
Practitioner & Systems Framework
💻 ERP Architecture
The unwinding journal is posted monthly or annually in the ERP's finance module. The rate is the original discount rate applied when the provision was recognised — changes in market risk-free rates affect new provisions but the unwinding of existing provisions uses the original locked-in rate. For provisions in foreign currencies, there is an additional FX translation element — the provision is retranslated at the closing rate (IAS 21) with translation differences in OCI. The unwinding is disclosed separately in the finance cost note. Total rehabilitation provision unwinding can be a significant finance charge for mature mining operations.
⚠️ Audit Flags
Auditors confirm the discount rate used for unwinding matches the rate at which the provision was established (locked-in rate). Test that the unwinding calculation is applied to the opening provision balance (before the year's additions from new disturbance). For operations in non-functional currency countries, confirm FX translation is applied correctly — the provision balance in local currency is translated at the closing rate with differences in OCI. Confirm the unwinding is classified as finance cost, not operating cost, in the income statement.
📄 Required Documentation
Provision roll-forward showing the unwinding component separately, original discount rate documentation, provision balance at start of period, unwinding calculation (balance × rate), FX translation workings (for foreign currency provisions), finance cost note disclosure, and historical discount rate schedule by provision tranche.
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