Asset Impairment Testing Agent
Runs periodic goodwill, long-lived asset, and investment impairment tests and documents the analysis to support financial statement conclusions.
Impairment testing under ASC 350 and ASC 360 requires identifying triggering events, defining reporting units and asset groups correctly, building discounted cash flow or market-based fair value models, and documenting judgment in a way that survives auditor and SEC scrutiny
Finance teams often treat impairment analysis as an annual fire drill built from scratch each cycle, with fair value models maintained by whoever built them last and key assumptions like discount rates and terminal growth poorly documented
Missing a triggering event between annual tests, such as a sustained stock price decline or loss of a major customer, is a common source of restatement risk
Coordinating inputs across FP&A, treasury, and business unit leaders under a tight reporting timeline adds further pressure to an already judgment-heavy process
The agent monitors qualitative and quantitative indicators, such as market capitalization relative to book value, business unit performance versus forecast, and macroeconomic factors, to flag potential triggering events between scheduled test dates. It maintains fair value models for each reporting unit or asset group, pulling current financial data, discount rate inputs, and comparable company multiples to run quantitative impairment tests, and generates the supporting memo documenting assumptions, sensitivities, and conclusions. Prior period assumptions are tracked so period-over-period changes in key inputs are visible and explainable to auditors.
Monitor Triggering Events
- Track market cap vs. book value and business unit performance vs. forecast
- Screen macroeconomic and industry indicators
- Flag potential interim triggering events for review
Build and Update Fair Value Models
- Refresh discounted cash flow and market multiple models per reporting unit
- Update discount rate and terminal growth assumptions
- Pull current financial actuals and forecasts into each model
Run Impairment Analysis
- Execute quantitative tests comparing fair value to carrying value
- Run sensitivity analysis on key assumptions
- Identify reporting units or asset groups at risk of impairment
Document and Report Findings
- Draft the supporting impairment memo with assumptions and sensitivities
- Compare assumptions to prior period for consistency
- Package documentation for auditor and disclosure committee review