unwinding of discount

well here is an example;

Suppose u have to pay US dollars 121 in 2 years time period for settlement of a liability. Assuming that the discount rate is 10%.

Then, today u will have to discount the liability and recongise it at its present value. Which would be =121*(1.10)^-2 = 100

Here coming the interest unwinding in the picture, so at the end of year 1 from today u will unwind the interest on the liability at 10%. Which would result in increase in liability by $ 10 i.e. (100*10%). While the liability will be increased to $ 110 at end of year 1 owing to unwinding of discount.

Hope it helps………………