What is Accretion?

Accretion is slow growth through gradual accumulation. In business, accretion occurs when profits are a direct result of a gain in assets or business growth. In investing, investors expect to see capital gains accumulate on investment. This is also referred to as accretion. Accretion also arises in Bond Accounting when an investor purchases a bond at a discount and later sells it for a gain (capital gain).

(Finance) Certified Bond Example of Accretion

For instance, a $1,000 bond obtained by an investor at $860 with a rate of maturity of 10 years. Between the time the bond is purchased and the maturity date, the capital gain should be $140. That $140 would be the payment amount owed on the purchased bond at maturity.