Discount Accretion

Accretion means addition or accumulation or accrual . In finance accretion or discount accretion is an accounting procedure which adjusts the value of a bond purchased at a discount, such as a zero-coupon bond. Accretion can be thought of as the antonym of amortization. The accretion of discount procedure adjusts the book value of the bond to the par value of the bond at maturity. It takes into account the interestpaid out for the bond, which is accrued as non-cash payments during the life of the bond and only paid out at maturity.

Accretion can be accounted for in a straight-line method, whereby the increase is evenly spread throughout the term.This would be done by increasing investment and crediting the discount accretion account in your profit and loss account over the period of maturity of the instrument.