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Budget Reforecast Trigger Decision Checklist
River separates the part of the variance that repeats from the part that does not, then tests it against conditions you set in advance.
Every published answer to this question is a percentage. Ten percent for two consecutive months, or three to five percent on a run rate, or fifteen percent cumulative, and then a list of events that count as material. The thresholds are sensible. What they get applied to is not. It is a variance nobody has taken apart yet, so every one of those screens runs against a mixture. A shipment that slipped four days, an order that will never repeat, and a demand signal that repeats every month left in the year.
A numerical screen also fails on its own terms, and the objection is already written down. Discussing financial statements rather than budgets, the SEC staff concluded that exclusive reliance on a quantitative benchmark to assess materiality is inappropriate, and that an item is not immaterial simply because it falls beneath a numerical threshold. That lands harder on a variance than on a misstatement, because the threshold is being asked to predict what happens next rather than to describe something that already happened.
Written for the controller at the May close with a board pack due and a lender certificate behind it, and for the finance lead who has reforecast three times this year and stopped being believed either way. Once the decision is made, the gap that repeats gets worked in the cost reduction plan and the capital line gets retested in the capex request. The ratio continues in the covenant headroom forecast, and a month that does not qualify gets a paragraph of commentary instead.
Every screen says note it and the credit agreement disagrees
Run the worked example below and every threshold on page one clears. Consolidated revenue is 2.42 percent under budget for the year to date. Take the four-day shipment slip out of the May close and the month is 4.49 percent under, inside the three-to-five band and nowhere near ten percent twice running. On the scenario the order book actually supports, the same company's fixed charge coverage falls to 1.1307 times against a covenant minimum of 1.20, with consolidated revenue only 4.76 percent off plan.
Half the conditions in that example are not finance's to interpret. A sustained decline in a reporting unit's expected cash flows forces an interim goodwill test, and the SEC staff does ask about it. One filer was asked how it considered ASC 350-20-35-30 in determining whether a triggering event had occurred. Another was pressed for its basis for not treating a 16 percent segment sales decrease that increased segment loss by 23 percent as a triggering event. A segment miss the consolidated total absorbs is still a segment miss.
So the output is a scope rather than a yes. Reforecast one segment, on one scenario, by the date the credit agreement already names. Hold the other 40.28 percent of the plan at budget with a paragraph, which is the part of a full reforecast that costs the most and returns the least. It also surfaces the decision nobody asked for: reversing a bonus accrual that will not pay moves coverage 0.3796 times, out of breach and into clearance, and that call sits with the compensation committee.
How it works
Add the actuals
Upload the month's actuals against budget, by segment or cost centre, and the year to date alongside them.
Add the conditions
Say what you wrote down in January, plus what your lender and incentive plan already require.
River tests them
It splits the variance, builds three scenarios from the part that repeats, and tests every condition against each.
Reforecast the scope
Rework only what a condition actually caught, and hold the rest at budget with a dated note.
What you get
- The variance split into timing, one-off and run-rate before any threshold is applied to it
- Three scenarios built from the part that repeats, not from three opinions about next quarter
- Every condition tested and marked with who owns it, so the answer is not negotiable
- Covenant coverage, impairment exposure and bonus threshold projected on the dates they are actually tested
- A scope: which segments to rework, on which scenario, by which date, and what stays at budget
- The leading indicators that met a written condition before the revenue variance appeared at all
Common questions
Is this a forecasting tool?
No. It decides whether to forecast, which is a different question and the one that never gets answered. Producing another set of scenarios is the easy part, and doing it every month is how a reforecast stops being believed. This runs before that work, and a good share of the time the answer is to hold the plan and write a paragraph.
What if we never wrote any conditions down?
Then it drafts a first set with you, out of what your credit agreement, your incentive plan and your goodwill balance already require, because those are conditions whether or not anybody typed them. Setting them after the miss is how the answer turns political, so the set gets dated and filed and next month's decision becomes a lookup rather than a debate.
Why decompose the variance first?
Because a threshold applied to a mixture measures nothing. In the worked example one segment is 18.40 percent under budget for the month, and 54.10 percent of that is two machines that shipped four days later than planned. What survives the split is 266,800 dollars a month of order intake, worth 1,867,600 over the rest of the year, and that is the only part with a future in it.
What if the run-rate gap comes from a cost that was just eliminated, not from demand?
That is a different kind of change and it usually will not repeat again the way a demand shift does. A zero-based budget review that eliminates a package or right-sizes a seat count produces a real, one-time step down in run-rate spend. That step belongs in the reforecast's run-rate scenario once it is approved, not folded into a demand assumption it has nothing to do with.
Does a small consolidated variance mean we are fine?
Not on its own. A covenant is tested on a ratio rather than on revenue, and a bonus threshold and an impairment test both apply below the consolidated total. In the example the credit agreement breaks on a scenario where revenue is 4.76 percent off plan. Liquidity is a third test again, run weekly in the thirteen week cash forecast.
Who is supposed to read the reforecast?
Name them, because each one needs a different number and that is what sets the scope. The lender reads a projected coverage ratio at a certificate date. The auditor reads a revised cash flow for a reporting unit carrying goodwill. The board reads a full-year outturn. A reforecast written for nobody in particular gets read by nobody.
Can we reforecast one segment only?
Usually that is the right answer, and it is rarely the one taken. Reworking the whole plan means asking every owner to redo lines where nothing has changed, and the delay is what makes the number late for the meeting that needed it. Hold what is still on plan at budget, say so in a sentence, and put the date the condition would next be tested next to it.
Budget Reforecast Trigger Decision Checklist
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