Depreciation is about recognizing when an asset loses value over time. It can happen due to use, time passing, or changes in technology. Companies have to figure out how to measure this loss accurately. If an asset's value drops a lot, the company can adjust its accounting to reflect this loss. They can either record it as a special loss or set aside money for it. Companies can choose to treat certain costs as long-term investments or just regular expenses. This choice affects how they manage their finances.