Jefferies Financial Group Inc.

Our consolidated financial statements are prepared in conformity

with U.S. generally accepted accounting principles (“U.S. GAAP”),

which requires management to make estimates and

assumptions that affect the amounts reported in our

consolidated financial statements and related notes. Actual

results can and may differ from estimates. These differences

could be material to our consolidated financial statements.

We believe our application of U.S. GAAP and the associated

estimates are reasonable. Our accounting estimates are

reevaluated, and adjustments are made when facts and

circumstances dictate a change. Historically, we have found our

application of accounting policies to be appropriate, and actual

results have not differed materially from those determined using

necessary estimates.

For further discussions of the following significant accounting

policies and other significant accounting policies, refer to Note 2,

Summary of Significant Accounting Policies in our consolidated

financial statements included in this Annual Report on Form 10-

K.

Valuation of Financial Instruments

yet purchased are recorded at fair value. The fair value of a

financial instrument is the amount that would be received to sell

an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date (the exit

price). Unrealized gains or losses are generally recognized in

Principal transactions revenues in our Consolidated Statements

of Earnings.

For information on the composition of our Financial instruments

owned and Financial instruments sold, not yet purchased

recorded at fair value, refer to Note 5, Fair Value Disclosures in

our consolidated financial statements included in this Annual

Report on Form 10-K.

Fair Value Hierarchy– In determining fair value, we maximize the

use of observable inputs and minimize the use of unobservable

inputs by requiring that observable inputs be used when

available. Observable inputs are inputs that market participants

would use in pricing the asset or liability based on market data

obtained from independent sources. Unobservable inputs reflect

our assumptions that market participants would use in pricing

the asset or liability developed based on the best information

available in the circumstances. We apply a hierarchy to

categorize our fair value measurements broken down into three

levels based on the transparency of inputs, where Level 1 uses

observable prices in active markets and Level 3 uses valuation

techniques that generally incorporate significant unobservable

inputs. Greater use of management judgment is required in

determining fair value when inputs are less observable or

unobservable in the marketplace, such as when the volume or

level of trading activity for a financial instrument has decreased

and when certain factors suggest that observed transactions

may not be reflective of orderly market transactions. Judgment

must be applied in determining the appropriateness of available

prices, particularly in assessing whether available data reflects

current prices and/or reflects the results of recent market

transactions. Prices or quotes are weighed when estimating fair

value with greater reliability placed on information from

transactions that are considered to be representative of orderly

market transactions.

Fair value is a market-based measure; therefore, when market

observable inputs are not available, our judgment is applied to

reflect those judgments that a market participant would use in

valuing the same asset or liability. The availability of observable

inputs can vary for different products. We use prices and inputs

that are current as of the measurement date even in periods of

market disruption or illiquidity. The valuation of financial

instruments categorized within Level 3 of the fair value hierarchy

involves the greatest extent of management judgment. Refer to

Note 2, Summary of Significant Accounting Policies and Note 5,

Fair Value Disclosures in our consolidated financial statements

included in this Annual Report on Form 10-K for further

information on the definitions of fair value, Level 1, Level 2 and

Level 3 and related valuation techniques.

For information on the composition of our Financial instruments

owned and Financial instruments sold, not yet purchased

recorded at fair value and the composition of activity of our Level

3 assets and Level 3 liabilities, refer to Note 5, Fair Value

Disclosures in our consolidated financial statements included in

this Annual Report on Form 10-K.

Controls Over the Valuation Process for Financial Instruments –

Our Independent Price Verification Group, independent of the

trading function, plays an important role in determining that our

financial instruments are appropriately valued and that fair value

measurements are reliable. This is particularly important where

prices or valuations that require inputs are less observable. In the

event that observable inputs are not available, the control

processes are designed to assure that the valuation approach

utilized is appropriate and consistently applied and that the

assumptions are reasonable. In addition, recently executed

comparable transactions and other observable market data are

considered for purposes of validating assumptions underlying

the model.

Significant judgment is required in estimating our provision for

income taxes. In determining the provision for income taxes, we

must make judgments and interpretations about how to apply

inherently complex tax laws to numerous transactions and

business events. In addition, we must make estimates about the

amount, timing and geographic mix of future taxable income,

which includes various tax planning strategies to utilize tax

attributes and deferred tax assets before they expire.

We record a valuation allowance to reduce our net deferred tax

asset to the amount that is more likely than not to be realized. We

are required to consider all available evidence, both positive and

negative, and to weigh the evidence when determining whether a

valuation allowance is required and the amount of such valuation

allowance. Generally, greater weight is required to be placed on

objectively verifiable evidence when making this assessment, in

particular on recent historical operating results.

We also record reserves for unrecognized tax benefits based on

our assessment of the probability of successfully sustaining tax

filing positions. Management exercises significant judgment

when assessing the probability of successfully sustaining tax

filing positions, and in determining whether a contingent tax

liability should be recorded and if so, estimating the amount. If

our tax filing positions are successfully challenged, payments

could be required that are in excess of reserved amounts or we

may be required to reduce the carrying amount of our net

deferred tax asset, either of which could be significant to our

financial condition or results of operations.

Impairment of Equity Method Investments

We evaluate equity method investments for impairment when

operating losses or other factors may indicate a decrease in

value which is other than temporary. We consider a variety of

factors including economic conditions nationally and in an

investment’s geographic area of operation, adverse changes in

the industry in which an investment operates, declines in

business prospects, deterioration in earnings, increasing costs of

operations and other relevant factors specific to the

investee. Whenever we believe conditions or events indicate that

one of these investments might be significantly impaired, we

generally obtain from such investee updated cash flow

projections and obtain other relevant information related to

assessing the overall valuation of the investee. Utilizing this

information, we assess whether the investment is considered to

be other-than-temporarily impaired. To the extent an investment

is deemed to be other-than-temporarily impaired, an impairment

charge is recognized for the amount, if any, by which the

investment’s book value exceeds our estimate of the

investment’s fair value.

In the first quarter of 2023, we performed a valuation of our

equity method investment in Golden Queen as forecasts of the

expected future production of gold and silver from its mine had

declined from previous periods. Our estimate of fair value was

based on a discounted cash flow analysis, which included

management’s projections of future Golden Queen cash flows

and a discount rate of 11.0%. As a result, an impairment loss of

$22.1 million was recorded in Other income for the three months

ended February 28, 2023. During the three months ended May 31,

2023, we recognized an additional impairment loss of $7.3

million primarily due to further declines in cash flows at Golden

Queen During the three months ended August 31, 2023, we

recognized an additional impairment loss of $27.8 million

primarily based on our estimate of what could be recognized in a

sale transaction for the investment. In the fourth quarter of 2023,

we sold Golden Queen and recognized a gain of $1.7 million on

the sale.

Goodwill

At November 30, 2025, goodwill recorded in our Consolidated

Statements of Financial Condition is$1.84 billion (2.4% of total

assets). The nature and accounting for goodwill is discussed in

Note 2, Summary of Significant Accounting Policies, and Note 12,

Goodwill and Intangible Assets, in our consolidated financial

Goodwill must be allocated to reporting units and tested for

impairment at least annually, or when circumstances or events

make it more likely than not that an impairment occurred.

Goodwill is tested by comparing the estimated fair value of each

reporting unit with its carrying value. Our annual goodwill

impairment testing date for a substantial portion of our reporting

units is August 1 and November 30 for other identified reporting

units. The results of our annual tests did not indicate any

goodwill impairment.

Estimating the fair value of a reporting unit requires management

judgment and often involves the use of estimates and

assumptions that could have a significant effect on whether or

not an impairment charge is recorded and the magnitude of such

a charge. Estimated fair values for our reporting units utilize

market valuation methods that incorporate price-to-earnings and

price-to-book multiples of comparable public companies and/or

projected cash flows. Under the market valuation approach, the

key assumptions are the selected multiples and our internally

developed projections of future profitability, growth and return on

equity for each reporting unit. The weight assigned to the

multiples requires judgment in qualitatively and quantitatively

evaluating the size, profitability and the nature of the business

activities of the reporting units as compared to the comparable

publicly-traded companies. Under the income approach the key

assumptions include our internally developed projections of

future cash flows, growth rates, and risk adjusted discount rates

which are sensitive to the interest rate environment and capital

market conditions. The valuation methodology for our reporting

units is sensitive to management’s forecasts of future

profitability, which are a significant component of the valuation

and come with a level of uncertainty regarding trading volumes

and capital market transaction levels. In addition, as the fair

values determined under the market valuation approach

represent a noncontrolling interest, we apply a control premium

to arrive at the estimate fair value of each reporting unit on a

controlling basis.

We use allocated tangible equity plus allocated goodwill and

intangible assets for the carrying amount of each reporting unit.

The amount of tangible equity allocated to a reporting unit is

based on our cash capital model deployed in managing our

businesses, which seeks to approximate the capital a business

would require if it were operating independently. For further

information on our Cash Capital Policy, refer to the Liquidity,

Financial Condition and Capital Resources section herein.

Intangible assets are allocated to a reporting unit based on either

specifically identifying a particular intangible asset as pertaining

to a reporting unit or, if shared among reporting units, based on

an assessment of the reporting unit’s benefit from the intangible

asset in order to generate results.

For certain of our reporting units included within Other

investments we may first assess qualitative factors to determine

whether it is more likely than not that the fair value of the

reporting unit is less than its carrying amount. If we determine on

the basis of this qualitative assessment that it is not more likely

than not that a reporting unit’s fair value is less than its carrying

amount, we place reliance on our qualitative assessment and no

quantitative calculation of the fair value of the reporting unit is

performed.

Carrying values of goodwill by reporting unit:

The results of our annual assessments indicated that all of our

reporting units had a fair value in excess of their carrying

amounts. Our valuation methodologies and the assessment of

qualitative factors are sensitive to management’s forecasts of

future probability. At November 30, 2025, our Stratos reporting

unit with allocated goodwill of$5.5 million is the most sensitive

to the forecast assumptions used in our market approach

valuation. Reductions in trading volumes and/or a decline in

performance from the expected levels assumed in our forecast

could cause a decline in the estimated fair value of our Stratos

reporting unit and a resulting impairment of a portion of our

goodwill.

Refer to Note 4, Business Acquisitions and Discontinued

Operations and Note 12, Goodwill and Intangible Assets in our

on Form 10-K for further details on goodwill.