For Benihana, what is compared to management's projections when evaluating the reasonableness of undiscounted future cash flows analysis?

We identified the determination of possible impairment indicators for long-lived assets as a critical audit matter because of the significant assumptions management makes when determining whether events or changes in circumstances have occurred indicating that the carrying amounts of long-lived assets may not be recoverable. This required a high degree of auditor judgement and an increased extent of effort when performing audit procedures to evaluate whether management appropriately identified impairment indicators.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the evaluation of long-lived asset impairment indicators included the following, among others:

• We tested the effectiveness of internal controls over the Company's long lived asset impairment indicator evaluation.
• We evaluated the reasonableness of the Company's evaluation of impairment indicators by:
  • Testing long-lived restaurant assets for possible indications of impairment, including searching for locations with current period losses or projected losses
  • Performing inquiries of management regarding the process and assumptions used to identify potential indicators of impairment and evaluating the consistency of the assumptions with evidence obtained in other areas of the audit
  • Inspecting minutes of the board of directors, the Company's public statements, operating plans, and industry data to identify any evidence that may contradict management's assumptions
• We tested the completeness and accuracy of the underlying source information used by management to identify quantitative indicators of impairment.

Source: Item 22 — CONTRACTS (FDD pages 73–74)