What does asset depreciation refer to?

Asset depreciation refers specifically to the reduction in value of an asset over time due to factors such as wear and tear, obsolescence, or changes in market demand. This concept is crucial in accounting and finance, as it affects how businesses report the value of their assets on financial statements and can impact tax liability.

As assets are used, they typically experience physical deterioration, which diminishes their usefulness and market value. This gradual loss is what's recognized in financial reporting as depreciation, allowing companies to allocate the cost of tangible assets over its useful life.

Understanding this concept is essential for proper asset management and financial planning, as it influences investment decisions and financial outcome assessments. The other options describe different aspects, such as market valuation or selling of assets, which do not pertain to the definition of depreciation.