How do we differentiate between "Impairment" and "Depreciation" of a non-current asset ?

Depreciation is : Systematic allocation of "depreciable amount" over asset useful life ( time or production ), controversial area of "depreciable amount" , IFRS or British accountants say that depreciable amount is all attributed cost to put this asset in production Minus "Residual Value" and they differentiate between residual value and recoverable value ....... others on different prefix of depreciable amount.

  Impairment : all agreed that impairment is the excess of carried value over "recoverable amount"

Impairment of a fixed asset is an abrupt decrease of its fair value due to damage, absolecense etc. When impairment of a fixed asset occurs, the business has to decrease its value in the balance sheet and recognize a loss in the income statement.

Following are the important terms to know before studying the topic further:

Recoverable Amount is the value of the benefits we can obtain from a fixed asset. Economic benefits are obtained either by selling the asset or by using the asset. Recoverable amount equals the higher of fair value less costs to sell and value in use.

Fair value less costs to sell is the current market value minus the costs that would be incurred in selling the assets such as commission, registration, etc.

Value in use is the present value of the future net cash flows expected to be derived from the continuing use of the asset.

If the carrying amount exceeds the recoverable amount, an impairment expense amounting to the difference is recognized in the period. If the carrying amount is less than the recoverable amount no impairment is recognized.

DEPRECIATION : Gradual Reduction in the Value of the Asset over a period of time.

Choose a method of cost apportionment that best matches revenue flow from the

asset

 Activity (units of use or production)

 Straight-line

 Accelerated

- sum-of-the-years’-digits

- declining-balance (150% /200%)Depreciation under GAAP cont’d

Three Important Notes About Depreciation:

if an assets carried at more  than it's recoverable amount if its carrying value exeeds the amount to be recovered through use  or sale of the assets .in these situation ,the assets described as impaired  and  recognized as loss 

Depreciation : is  distirbuted the amount of assets on its  life time  during  use in company operations  

impairment is reduction of assets due to change in it,s fair value 

depreciation is allocation of historcal data ( purchasing value up to ready to use )  between the expected age of asset