Provision for decontamination costs

4000 is the present value of future decontamination cost at a discount rate of 10%.

so, 10% of 4000 is 400. this 400 is unwinding of discount.

now, at year end, future decontamination cost is 4400.

next year end, it would become 4800.

so, after 2 years, it would become 4400+440=4840

now , calculating reverse,

present value of 4840 = 4840/1.1/1.1=4000

at the year end, u got 4400.
present value of 4400 is 4400/1.1 =4000.

since, 10% is the discount rate we take 1.1

1.1 power n. n is the number of year. if 3 year. , take 1.1^3.
if 2 year, take 1.1^2. then u would get present value.
but in our qn, present value is given directly. so, we have to find, 4000*10%=400, which discount at to be added to 4000. this is called unwinding the discount.