Mitsubishi UFJ Financial Group, Inc.
Significant assumptions used in our calculation of allowance for credit
losses, including those described above, are subject to uncertainty. In particular, some counterparties prospects of improvements in their operating results and expectations as to their ability to continue as going concerns, and adjustments to
the rate of loss calculated based on actual experience for future projections and other factors, as well as determination of the macroeconomic variables used in, and the weightings applied to, multiple economic forecast scenarios, and adjustments
thereto for qualitative factors, by certain subsidiaries which apply U.S. GAAP, are based on estimation relating to factors with respect to which objective data are not readily available such as changes in the economic environment, commodity prices,
monetary policy and geopolitical situation in each country.
In particular, the outlook relating to the Russia-Ukraine
situation remains subject to significant uncertainty. Accordingly, we make certain assumptions, including that the current Russia-Ukraine situation will remain for some time. The recorded allowance for credit losses represents our best estimation
made in a manner designed to ensure objectivity and rationality.
For the nine-month period ended December 31, 2023, the
assumptions for making estimates relating to allowance for credit losses remained substantially unchanged because the observable changes subsequent to the end of the previous fiscal year in the factors and circumstances underlying the outlook
relating to the Russia-Ukraine situation were not sufficiently significant to cause such change in the assumptions. However, these assumptions are highly uncertain, and significant additional provision for credit losses may be recognized for the
fiscal year ending March 31, 2024, and subsequent reporting periods due to these and other factors and circumstances affecting the financial performance of counterparties or the economic environment.
(Provisional closing of accounts of a significant equity-method affiliate)
Morgan Stanley, a significant equity-method affiliate of MUFG, closes its financial accounts based on a fiscal year-end of
December 31 and, previously, the equity method of accounting was applied to Morgan Stanleys consolidated financial statements as of the end of Morgan Stanleys quarterly reporting period. However, from the perspective of providing
financial information in a more timely manner, MUFG has decided to make modifications so that, effective from the nine months ended December 31, 2023, the equity method of accounting will be applied to Morgan Stanley based on a provisional closing
of accounts to be implemented as of December 31, which is the end of MUFGs quarterly reporting period.
Accordingly,
for the nine months ended December 31, 2023, the equity method of accounting have been applied to Morgan Stanleys consolidated financial statements for the twelve-month period from January 1, 2023 to December 31, 2023 based on a provisional
closing of accounts, and the impact of implementation of such provisional closing of accounts has been reflected in MUFGs consolidated financial statements for the nine months ended December 31, 2023.
For the period from January 1, 2023 to March 31, 2023, equity in earnings of the equity method investees related to Morgan
Stanley is 99,295 million, losses on change in equity related to Morgan Stanley is 22,058 million, and share of other comprehensive income of associates accounted for using equity method related to Morgan Stanley included in other comprehensive
income is 204,599 million.
8