BC26 The IFRIC considered whether the unwinding of the discount is a borrowing cost for the purposes of IAS 23 Borrowing Costs. This question arises because if the unwinding of the discount rate were deemed a borrowing cost for the purposes of IAS 23, in certain circumstances this amount might be capitalised under the allowed alternative treatment of capitalisation. [In March 2007, IAS 23 was revised to require the previously allowed alternative treatment of capitalisation. Capitalisation of borrowing costs for a qualifying asset becomes the only accounting treatment. That revision does not affect the reasoning set out in this Basis for Conclusions.] The IFRIC noted that IAS 23 addresses funds borrowed specifically for the purpose of obtaining a particular asset. It agreed that a decommissioning liability does not fall within this description since it does not reflect funds (ie cash) borrowed. Hence, the IFRIC concluded that the unwinding of the discount is not a borrowing cost as defined in IAS 23.

BC27 The IFRIC agreed that the unwinding of the discount as referred to in paragraph 60 of IAS 37 should be reported in profit or loss in the period it occurs.