What does accretion expense mean on the CPA exam?
Accretion expense. The increase in an asset retirement obligation from the passage of time, measured by the interest method at the credit-adjusted risk-free rate in effect when the liability was first measured. Classified as an operating item, and not interest cost for capitalization purposes.
Defined against ASC 410-20-35-5, 45-1.
Which CPA exam sections use accretion expense?
Accretion expense appears in the FAR section of the CPA exam.
Other terms defined against ASC 410-20
- asset retirement obligation: A legal obligation associated with the retirement of a tangible long-lived asset, recognized at fair value in the period incurred, with an equal asset retirement cost capitalized into the asset.
Related terms
- interest expense: The cost of borrowing for the period, accrued as time passes rather than when the payment is made.
- functional expense: Expense classified by what it was FOR -- program, management and general, fundraising -- rather than by what it was.
- right-of-use asset: The lessee's asset representing its right to use the leased item for the lease term.
- cash equivalents: Short-term, highly liquid investments readily convertible to known amounts of cash and so near maturity that interest rate changes pose insignificant risk.
- lease liability: The lessee's obligation to make the remaining lease payments, measured at their present value.
- carrying amount: What an asset or liability is currently shown at on the balance sheet: its original amount adjusted for depreciation, amortization, impairment or accrual.