Accretion generally refers to the gradual and organic growth in the value of assets.
This can be a result of incremental growth in the size of the market, progressive increase of market share, inflationary growth of sale revenue, mergers and acquisitions, etc.
In some circles, accretion only occurs when an increase in asset value is due to physical change. For example, the cultivation and harvesting of crops on land.
In corporate finance, the term accretion is usually used to refer to company expansion as a result of acquisitions of assets or other companies.
For example, a company might see it’s market value increase by $1m after acquiring another company for $750,000.
In general, the growth in company can sometimes be loosely associated with the increase in the number of employees, an expansion of markets, a growth in revenue, increase in share price, etc.
In real estate, it can refer to the addition and expansion of land area due to alluvial soil deposits that occurred naturally. This can happen to riverside property where water follow has carried soil to the land parcel.
This added land on the parcel become the property of the landowner. And if the property has been pledged as collateral to a bank for a mortgage, then the additional land would automatically become part of the collateral.
If the appreciation in value is significant, it might be worth while to get a new home equity loan on the property or use it to obtain a line of credit.
Something to note with regards to real estate is that when land area is increased as a result of receding shoreline instead of additional soil deposits, it is called dereliction.
In financial markets, accretion can refer to the adjustment of bond prices, face value and their projected redemption yield at maturity.
It can also refer to to the increase of a company’s earnings per share (EPS) after an acquisition.
