Organization and Basis of Presentation

12 Months Ended

Nov. 30, 2022

Organization

Jefferies Financial Group Inc. is a U.S.-headquartered global full service, integrated investment banking and securities firm. The accompanying Consolidated Financial Statements represent the accounts of Jefferies Financial Group Inc. and subsidiaries (together “we” or “us”). We, collectively with our consolidated subsidiaries and through our affiliates, deliver a broad range of financial services across investment banking, capital markets and asset management.

We operate in two reportable business segments: (1) Investment Banking and Capital Markets and (2) Asset Management. The Investment Banking and Capital Markets reportable business segment includes our securities, commodities, futures and foreign exchange capital markets activities and our investment banking business, which provides underwriting and financial advisory services to our clients across most industry sectors. We operate globally in the Americas; Europe and the Middle East; and Asia. Investment Banking and Capital Markets also includes our corporate lending joint venture (“JFIN Parent LLC” or “Jefferies Finance”), our commercial real estate joint venture (“Berkadia Commercial Holding LLC” or “Berkadia”) and our automobile lending and servicing activities. The Asset Management reportable business segment provides alternative investment management services to investors in the U.S. and overseas and generates investment income from capital invested in and managed by us or our affiliated asset managers.

Jefferies Group LLC (“Jefferies Group”), our investment banking and securities firm, was historically operated as a separate consolidated subsidiary and was a separate Securities and Exchange Commission (“SEC”) reporting company, filing annual, quarterly and periodic financial reports. On November 1, 2022, Jefferies Group was wholly merged into Jefferies Financial Group Inc., which has eliminated the requirement for separate SEC report filings. In addition, we have historically owned a portfolio of investments that have been reflected in our consolidated financial statements as consolidated subsidiaries, equity investments, securities or in other ways that constituted our “merchant banking” business, which were reported as part of our Merchant Banking reportable segment. During the year ended November 30, 2022 and in connection with the merger, we transferred significantly all of our Merchant Banking investments into our Asset Management reportable segment. Certain other publicly traded equity investments related to investment banking relationships were transferred from our Merchant Banking reportable segment to our Investment Banking and Capital Markets reportable segment. These investments are now managed by the respective segment managers. Additionally, activities that were presented as part of the Corporate reportable segment are now fully allocated to either the Investment Banking and Capital Markets or Asset Management reportable segments. Prior year amounts have been revised to conform to the current segment reporting. For further information on our reportable business segments, refer to Note 24, Segment Reporting.

During the year ended November 30, 2022, we sold all of our interests in Idaho Timber and sold our interests in the Oak Hill investment management company, registered investment adviser and general partner entity and recognized a gain on sale of $138.7 million and $175.1 million, respectively. These gains are presented within Other revenues in the Consolidated Statements of Earnings and included within our Asset Management reportable business segment.

Reclassifications to Consolidated Financial Statements

We have made certain reclassifications within our Consolidated Statements of Financial Condition and Consolidated Statements of Earnings in connection with the merger of Jefferies Group into Jefferies Financial Group Inc. This streamlines our financial statements and better aligns the presentation of our firm with our strategy of building our investment banking and capital markets and asset management businesses and reducing our legacy merchant banking portfolio. The reclassifications including, but not limited to, the presentation of equity method investments and any related equity method earnings, loans receivable, intangible assets and interest expense within the financial statements, conform to the presentation utilized in the historical Jefferies Group LLC consolidated financial statements prior to the merger. Additionally, the presentation of receivables, payables, asset management fees and revenues and selling, general and other expenses has been disaggregated to provide additional financial statement line item categories on the face of the Consolidated Statements of Financial Condition and the Consolidated Statements of Earnings. These reclassifications have no effect on our consolidated net earnings, comprehensive income, total assets, total liabilities or total equity. These reclassifications have no effect on the net change in cash, cash equivalents and restricted cash. Historical periods have been recast to conform to these reclassifications.

Changes to Consolidated Financial Statements for Change in Accounting Policy

As of November 30, 2022, we have changed the accounting for our secondary trading activity related to the purchases and sales of corporate loans. Historically, we have accounted for purchases and sales of corporate loans in the secondary market on trade date. Purchases of loans in the secondary market were recognized on trade date within Financial instruments owned for the total amount of the loans and a corresponding liability was recognized within Payables - brokers, dealers and clearing organizations. Sales of loans in the secondary market were recognized on trade date within Financial instruments sold, not yet purchased for the total amount of the loans and a corresponding asset was recognized within Receivables - brokers, dealers and clearing organizations on the Consolidated Statements of Financial Condition for the amount of cash to be paid or received upon settlement. We have determined that it is preferable to recognize this trading activity on a settlement date basis. A firm commitment to purchase and/or sell loans on the date of trade execution due to the extended settlement period for this trading activity is recognized and results in recognizing the changes in fair value related to the underlying purchased loans or sold loans. We have elected the fair value option for the firm commitment to purchase or sell loans and account for changes in the fair value of the firm commitment within Principal transactions revenues between the trade date and settlement date on the Consolidated Statement of Earnings and within Financial Instruments owned, or Financial Instruments sold on the Consolidated Statement of Financial Condition.

This change in accounting policy resulted in a reduction of Financial instruments owned of $2.1 billion, Financial instruments sold, not yet purchased of $2.8 billion, Payables - Brokers of $2.4 billion and Receivables - Brokers of $3.1 billion on the Consolidated Statement of Financial Condition at November 30, 2022. There was no impact to net earnings or total equity as a result of this change in accounting policy.

The following table sets forth our Consolidated Statement of Financial Condition as of November 30, 2021 as originally reported and as revised and presented within these consolidated financial statements as a result of the reclassifications and change in accounting policy.


	Balance at November 30, 2021
	As Originally Reported		Increases/Decreases due to reclassifications		Increases/Decreases due to change in accounting policy		As Revised
Assets:
Financial instruments owned	$	19,828,670	$	50,964	$	(1,855,013)	$	18,024,621
Investments in and loans to related parties	1,745,790		(158,381)		—		1,587,409
Receivables (1)	7,839,240		(7,839,240)		—		—
Receivables - Brokers, dealers and clearing organizations	—		4,896,704		(2,441,786)		2,454,918
Receivables - Customers	—		1,615,822		—		1,615,822
Receivables - Fees, interest and other	—		582,756		—		582,756
Intangible assets, net and goodwill	1,897,500		(1,897,500)		—		—
Goodwill	—		1,745,098		—		1,745,098
Other assets (1)	2,352,247		1,003,777		—		3,356,024
Total assets	60,404,110		—		(4,296,799)		56,107,311
Liabilities:
Financial instruments sold, not yet purchased	$	11,699,467	$	—	$	(2,432,377)	$	9,267,090
Payables, expense accruals and other liabilities	13,612,367		(13,612,367)		—		—
Payables - Brokers, dealers and clearing organizations	—		5,816,515		(1,864,422)		3,952,093
Payables - Customers	—		4,461,481		—		4,461,481
Accrued expenses and other liabilities	—		3,334,371		—		3,334,371
Total liabilities	49,674,070		—		(4,296,799)		45,377,271

(1) Automobile loans of $745.3 million historically presented within Receivables have been reclassified to Other assets on the Consolidated Statement of Financial Condition.

The following table sets forth our Consolidated Statements of Earnings for the years ended November 30, 2021 and 2020 as originally reported and as revised and presented within these consolidated financial statements as a result of the reclassifications.


	Year Ended November 30, 2021						Year Ended November 30, 2020
	As Originally Reported		Increases/Decreases due to reclassifications		As Revised		As Originally Reported		Increases/Decreases due to reclassifications		As Revised
Principal transactions	$	1,623,713	$	(6,377)	$	1,617,336	$	1,916,508	$	11,635	$	1,928,143
Asset management fees and revenues	—		72,084		72,084		—		34,209		34,209
Interest	943,336		12,982		956,318		997,555		11,993		1,009,548
Other	1,211,120		(173,108)		1,038,012		718,125		(133,320)		584,805
Total revenues	9,039,883		(94,419)		8,945,464		6,955,930		(75,483)		6,880,447
Interest expense	854,554		77,084		931,638		945,056		84,870		1,029,926
Net revenues	8,185,329		(171,503)		8,013,826		6,010,874		(160,353)		5,850,521
Compensation and benefits	3,551,124		3,636		3,554,760		2,940,863		3,208		2,944,071
Interest expense	77,084		(77,084)		—		84,870		(84,870)		—
Selling, general and other expenses	1,278,447		(1,278,447)		—		1,078,956		(1,078,956)		—
Underwriting costs	—		117,572		117,572		—		95,636		95,636
Technology and communications	—		388,134		388,134		—		335,065		335,065
Occupancy and equipment rental	—		106,254		106,254		—		95,754		95,754
Business development	—		109,772		109,772		—		70,797		70,797
Professional services	—		215,761		215,761		—		176,280		176,280
Other expenses	—		337,318		337,318		—		302,216		302,216
Total expenses	5,836,805		(77,084)		5,759,721		4,868,308		(84,870)		4,783,438
Income (loss) related to associated companies	(94,419)		94,419		—		(75,483)		75,483		—

Conforming changes consistent with these reclassifications have been made to our Consolidated Statements of Cash Flows and to Note 4, Fair Value Disclosures, Note 5, Derivative Financial Instruments, Note 9, Investments, Note 10, Credit Losses on Financial Instruments Measured at Amortized Cost and Note 24, Segment Reporting within our consolidated financial statements for the years ended November 30, 2021 and 2020.

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for financial information.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period to prepare these consolidated financial statements in conformity with U.S. GAAP. The most important of these estimates and assumptions relate to fair value measurements, compensation and benefits, goodwill and the accounting for income taxes. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.

Consolidation

Our policy is to consolidate all entities that we control by ownership of a majority of the outstanding voting stock. In addition, we consolidate entities that meet the definition of a variable interest entity (“VIE”) for which we are the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. For consolidated entities that are less than wholly-owned, the third-party’s holding of equity interest is presented as Noncontrolling interests in our Consolidated Statements of Financial Condition and Consolidated Statements of Changes in Equity. The portion of net earnings attributable to the noncontrolling interests is presented as Net earnings (loss) attributable to noncontrolling interests in our Consolidated Statements of Earnings.

In situations in which we have significant influence, but not control, of an entity that does not qualify as a VIE, we apply either the equity method of accounting or fair value accounting pursuant to the fair value option election under U.S. GAAP, with our portion of net earnings or gains and losses recorded in Other revenues or Principal transactions revenues, respectively. We also have formed nonconsolidated investment vehicles with third-party investors that are typically organized as partnerships or limited liability companies and are carried at fair value. We act as general partner or managing member for these investment vehicles and have generally provided the third-party investors with termination or “kick-out” rights.

Intercompany accounts and transactions are eliminated in consolidation.