What Does "accretion" Mean in Accounting?


Quick Answer

In accounting, the word "accretion" refers to growth in value over time. Accretion typically refers to the increase of value of a bond over time.

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What Does "accretion" Mean in Accounting?
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Full Answer

Bonds increase in value as they reach their maturity date due to accrued interest. The difference in value from the original price to current price is called accretive earnings.

Accretion is also used to describe mergers and acquisitions. Like bond maturity, a merger or acquisition that is perceived as adding more value to shareholders is known as an accretive merger or acquisition.

Accretion also applies to expenses. The cost of a financial obligation increases as it nears its due date. This is known as an accretion expense.

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