Mitsubishi UFJ Financial Group, Inc.
Notes to the Consolidated Financial Statements
(Notes on Going-Concern Assumption)
None.
(Changes in Presentation of Financial Information)
Refund of income taxes, which was previously presented separately from Income taxes, on a disaggregated
basis for the fiscal year ended March 31, 2023, is included in Income taxes on a net basis from the fiscal year ended March 31, 2024 due to the decreased significance in the recorded amount. In order to reflect this change in
presentation, the consolidated financial statements for the fiscal year ended March 31, 2023 have been reclassified.
As a result, Income taxes of ¥493,256 million and Refund of income taxes of ¥(56,288)
million previously presented in the consolidated statement of income for the fiscal year ended March 31, 2023 have been aggregated on a net basis and reclassified into Income taxes of ¥436,968 million.
(Additional Information)
(Information that is relevant to readers understanding of the consolidated financial statements regarding the calculation
of allowance for credit losses)
The process of calculating the allowance for credit losses for the Bank and its domestic
consolidated subsidiaries, our principal domestic consolidated banking subsidiaries, involves various estimates such as determination of borrower credit ratings which are based on evaluation and classification of borrowers debt-service
capacity, assessment of the value of collateral provided by borrowers, estimation of future cash flows when applying the cash flow estimation method, and adjustments for future loss projections and other factors to the loss rates calculated based on
historical credit loss experience.
Among these, internal credit ratings are assigned to counterparties based on
qualitative factors such as the current and expected future business environment of the industry to which they belong as well as their management and funding risks in addition to quantitative financial evaluations through an analysis of their
financial results. In particular, those determination of internal credit ratings for these counterparties may be highly dependent on our assessment of the prospects of improvements in their operating results and their ability to continue as going
concerns.
MUFG Bank, Ltd. (the Bank), our principal consolidated domestic banking subsidiary, applies the cash
flow estimation method when providing for allowance for credit losses for loans to substantially bankrupt borrowers and borrowers requiring special attention and caution in cases where it is possible to reasonably estimate the cash flows related to
the collection of loan principal and receipt of interest payments. The estimation of such future cash flows is based on a borrower-specific assessment regarding the collectability of loans, including past collection experience, evaluation of the
borrowers restructuring plans, the financial condition and operating results of the borrower, and the economic environment of the industry to which the borrower belongs. In this regard, the estimation of future cash flows may be highly
dependent on estimation of borrowers future performance and business sustainability. Estimates are subject to a high degree of uncertainly especially when made in connection with assessments regarding the collectability of loans to
substantially bankrupt borrowers with respect to which objective information is not reasonably available.
In addition,
when calculating allowance for credit losses, the Bank determines loss rates primarily by calculating a rate of loss based on a historical average of the credit loss rate or a historical average of the default probability derived from actual credit
loss experience or actual bankruptcy experience and making necessary adjustments based on future projections and other factors.
The Bank makes such adjustments based on future projections and other factors to the loss rate calculated based on historical
loss experience, when and to the extent such adjustments are deemed appropriate by, for example, considering any additional expected loss amount not reflected in such loss rate calculated based on historical loss experience, especially in light of
the Russia-Ukraine situation. The amount of impact of these adjustments as of the end of the current fiscal year is 42,492 million yen (69,569 million yen as of March 31, 2023). Given that actual loss information after the expansion
of COVID-19 has been accumulated and the impact of COVID-19 is reflected in the loss rates calculated based on historical loss experience, starting in the second quarter
of the fiscal year ended March 31, 2024, no adjustments are made based on future projections that take into account the rate of increase in the credit loss rate or the default probability in a recent period.
13