Challenge impairment and valuation assumptions unit by unit
For: Chief financial officer, valuation lead or audit partner reviewing impairment tests
The pain today
Growth, margin and discount rate assumptions for each cash-generating unit are defended with management's own narrative. Contradicting evidence in board papers, budget-versus-actual reports and order books is rarely lined up against them.
The ask
“I attached the impairment models, the assumption memos, board papers, budgets against actuals and order book reports for each business unit. For every key assumption, make the case for it from these documents, then argue against it from the same documents, and tell me which assumptions are poorly supported.”
Plain words, as you would say it to a colleague. Edit it to fit your case before you send it.
What you attach or connect
- Impairment or valuation models per unit
- Management assumption memos
- Board papers and strategy documents
- Budget-versus-actual history
- Order book, pipeline and market reports
The unit of work
One worker task per one assumption for one cash-generating unit.
Why a swarm fits
Each assumption is tested against a narrow slice of one unit's documents, and a group has many units with several assumptions each. Supporting and attacking with different model families reduces shared optimism.
Not for
One unit with ample headroom, or choosing a discount rate from market data the documents do not contain.
The decision tree
6 typed decisions, each with an action for every answer
At fixed moments in a run, the engine puts one narrow question to a decision model. The decision model never writes text: it answers yes or no with a probability, picks from listed options, or gives a score, about a small slice of the material. The engine then does exactly what this tree says, which is what makes the run auditable. The thresholds are the template's design values, not measured results.
Planner, while planning
Scope checkYes or no, with a probability
Before work starts on a unit
Is this an assumption the outcome is sensitive to, according to the sensitivity table in the memo?
Sees only: The assumption and the memo's sensitivity table for the unit
Why: Debate is spent on the assumptions that can move the result.
- Yes: 0.60 or higherthenAccept
- Unsure: 0.30 up to 0.60thenAccept
- No: below 0.30thenSkip this unit
After workers, the judge checks
Evidence checkYes or no, with a probability
After a worker answers
Do the quoted order book or budget-versus-actual figures support the growth rate assumed for this unit in the years shown?
Sees only: The assumption and the supporting side's quoted figures
Why: Management narrative is not evidence; figures from the unit's own records are.
- Yes: 0.85 or higherthenAccept
- Unsure: 0.50 up to 0.85thenMark unresolved
- No: below 0.50thenReject and retry
Evidence checkA choice among options
After a worker answers
What does the challenger's quoted document say about this assumption?
Sees only: The assumption and the challenger's quoted board paper or report
Why: A challenge has to be on point to count against an assumption.
- States a lower or later figure than the memothenMark unresolved
- Concerns another unit or periodthenSkip this unit
- Opinion with no figurethenSkip this unit
Reconciler, while merging
Conflict checkYes or no, with a probability
While reconciling
Does the input in the model differ from the figure the memo states for the same assumption?
Sees only: The model input cell and the memo sentence
Why: Memo and model drifting apart is a finding auditors always raise.
- Yes: 0.60 or higherthenMark unresolved
- Unsure: 0.30 up to 0.60thenMark unresolved
- No: below 0.30thenAccept
Run control, between rounds
Another round?Yes or no, with a probability
Between rounds
Did the last exchange cite a document not already weighed for this assumption?
Sees only: The citations of the last exchange
Why: Stops when both sides have run out of documents.
- Yes: 0.60 or higherthenContinue
- Unsure: 0.30 up to 0.60thenStop
- No: below 0.30thenStop
Accountable person, before anything is settled
Person decidesYes or no, with a probability
Before anything is reported as settled
Is this assumption contradicted or untested, so that management and the auditor must decide what to do with it?
Sees only: The assumption register entry
Why: Management owns the assumption; the auditor owns the conclusion.
Accountable: Management owns the assumptions and the impairment decision; the auditor owns the audit conclusion. The swarm only lines up evidence.
- Yes: 0.40 or higherthenAsk a person
- Unsure: 0.15 up to 0.40thenAsk a person
- No: below 0.15thenAccept
The fleet: who does what
Model tiers by role, not brands: you choose the models. Strong reasoning models plan and reconcile, small fast models do the wide work, and the judge is a decision model from a different family, so it does not share the workers' blind spots.
Planner
A strong reasoning model lists the key assumptions per unit and the documents that could confirm or contradict each.
Decisions here:1. Scope check
Workers
Small fast workers argue for one assumption; workers from another family argue against it, both quoting the documents.
Designed for 8 to 200 agents, one worker task per one assumption for one cash-generating unit. Each worker receives only its own unit.
Judge, from a different model family
A decision model from a third family rules whether the assumption is supported, contradicted or untested by the evidence.
Decisions here:2. Evidence check3. Evidence check
Reconciler
A strong reasoning model summarises weak assumptions per unit and notes where management's own documents disagree.
Decisions here:4. Conflict check5. Another round?
Accountable person
Management owns the assumptions and the impairment decision; the auditor owns the audit conclusion. The swarm only lines up evidence.
Decisions here:6. Person decides
Checked before anything is accepted
- Historical forecast accuracy is computed in code from budget-versus-actual data
- Both sides must quote documents; assertion without a source is discarded
- The model's inputs are checked against the figures stated in the memo
- Assumptions with no relevant evidence either way are reported as untested
What comes back
- Assumption register per unit: supported, contradicted or untested
- Contradicting evidence with quotes and dates
- Differences between memo, model and board papers
- Questions for management per unit
What to measure
- Challenged assumptions management later revises
- Auditor challenges the review had anticipated
- Review hours per cash-generating unit
Names of measures only. No result is claimed for this template.
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