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In finance, the term accretion refers to a positive change in value following a transaction; it is applied in several contexts. When trading in bonds , accretion is the capital gain expected when a bond is bought at a discount to its par value , [ 1 ] given that, it is expected to mature at par .
In particular, "accretion expense" is a phrase used in topic 410-20 of the United States GAAP Codification of Accounting Standards (SFAS 143), which describes the reporting of asset retirement obligations. This kind of liability typically has a long and predetermined life on a company's balance sheet, and hence, as mentioned, it is valued via DCF.
Amortization is the acquisition cost minus the residual value of an asset, calculated in a systematic manner over an asset's useful economic life. Depreciation is a corresponding concept for tangible assets. Methodologies for allocating amortization to each accounting period are generally the same as those for depreciation.
A bond is a form of debt where the bond issuer borrows money in return for paying interest and returning the bond’s principal to the buyer when the bond matures. Bonds are commonly issued by ...
Amortization of debt has two major effects: Credit risk First and most importantly, it substantially reduces the credit risk of the loan or bond. In a bullet loan (or bullet bond), the bulk of the credit risk is in the repayment of the principal at maturity, at which point the debt must either be paid off in full or rolled over. By paying off ...
The fund comes with no investment minimums and a low cost, making it a solid pick as a core bond holding in a diversified portfolio. 5-year annualized return: 0.2 percent Yield: 3.1 percent