Discover Financial Services (DFS, Financial) has recently received a notice from the New York Stock Exchange (NYSE) indicating non-compliance with Section 802.01E of the NYSE Listed Company Manual. This notice was issued due to the company's failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ending September 30, 2024, with the U.S. Securities and Exchange Commission (SEC) by the deadline of November 18, 2024. Despite this notice, there is no immediate impact on the listing of Discover's common stock on the NYSE.
In addition to the compliance notice, Discover Financial Services has announced plans to restate its financial statements. This decision follows a review by the SEC Staff, which disagreed with the company's previous accounting approach regarding a misclassification of certain credit card accounts. The company had initially recognized a liability of $365 million related to this issue, which has now been increased to $1.2 billion. The restatement will reflect an alternative approach agreed upon with the SEC, adjusting the cumulative revenue error to approximately $1,047 million.
The restatement will involve reallocating $600 million of the liability increase from other expenses to a revenue error correction in prior periods. Additionally, $124 million in interest payments will be reallocated to the third and fourth quarters of 2023. The company expects these changes to result in an increase in assets by $190 million, an increase in accrued expenses and other liabilities by $783 million, and a decrease in retained earnings by $593 million as of December 31, 2023.
Discover Financial Services is working diligently to file the restated financial statements before the end of the year. The company also anticipates that Capital One will file a pre-effective amendment to the Registration Statement following the completion of these filings. This is part of the ongoing merger process between Discover and Capital One, which was announced earlier this year.
Investors and stakeholders are advised to review the forthcoming filings and updates to understand the full impact of these developments on Discover Financial Services' financial position and the pending merger with Capital One.
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