Discover Financial Services will restate financial statements amid SEC scrutiny
- The company will restate its financial statements to correct significant revenue misclassifications related to card products.
- The SEC raised concerns over Discover's revenue recognition practices during its review prompted by Capital One's merger.
- These restatements could have substantial effects on Discover's financial position and ongoing merger process with Capital One.
In the United States, Discover Financial Services received a notice from the New York Stock Exchange regarding its filing requirements after identifying significant errors in its financial reporting. This issue has been tied to a misclassification of card product revenue, which led to an increase in liabilities from $365 million to $1.2 billion. Following an SEC review, the company will have to restate financial statements for previous periods to reflect an alternative approach regarding these liabilities. The Audit Committee has decided that the affected financial reports should no longer be relied upon, prompting amendments to their quarterly and annual filings. The restatement is expected to impact the company's assets, accrued expenses, and retained earnings significantly, and a pre-effective amendment to the Registration Statement related to the upcoming merger with Capital One will also be filed after the restated financials.