MORGAN STANLEY

Table of Contents

Management’s Discussion and Analysis

Accounting Development Updates

The Financial Accounting Standards Board has issued certain accounting updates that apply to us. Accounting updates not referenced below were assessed and determined to be either not applicable or to not have a material impact on our financial statements upon adoption.

•ASU 2025-06 - Internal-Use Software (Issued September 2025). This update introduces targeted improvements to the recognition and capitalization guidance for internal-use software costs. The update eliminates the prior “project stage” framework and instead requires capitalization of software development costs when (i) management has authorized and committed to funding the software project, and (ii) it is probable that the project will be completed and the software will be used to perform its intended function. In assessing the probability threshold, entities are required to evaluate whether significant development uncertainty exists, including whether the software contains novel or unproven functionality or whether significant performance requirements have not been identified or continue to be substantially revised. The update is effective for the Firm beginning January 1, 2028, with early adoption permitted. Transition may be applied prospectively, retrospectively, or under a modified approach. We are currently evaluating this accounting update.

•ASU 2026-02 – Environmental Credits and Environmental Credit Obligations (Issued May 2026). This update establishes guidance on the recognition, measurement, presentation, and disclosure of environmental credit assets and environmental credit obligations. This update requires entities to recognize and measure: (1) environmental credit assets based on their intended use (e.g., compliance environmental credits, noncompliance environmental credits and voluntary credits) as well as how the credits are obtained (e.g., acquired, internally generated); and (2) environmental credit obligations based on whether the entity holds and expects to use compliance environmental credits to settle that obligation. The update is effective for the Firm beginning January 1, 2028, with early adoption permitted. Transition should be applied on a modified retrospective basis. We are currently evaluating this accounting update; however, we do not expect a material impact on our financial statements upon adoption.