Discover Financial Services said it will miss a deadline to file its quarterly report with regulators, citing disagreements with the Securities and Exchange Commission over its accounting treatment of a credit-card misclassification blunder.
The company said in a filing Wednesday that it was unable to file the 10-Q form for the three months through Sept. 30 by the required date after SEC staff disagreed with "certain aspects of the company's accounting approach for the card product misclassification matter."
Discover disclosed
Discover expects that when it files its 10-Q form, it will likely reflect re-allocations to prior periods of about $600 million of the charge to other expenses recorded in its quarterly report for the period ended March 31, it said. The firm said that because the reallocations would reverse a charge to other expenses recorded for the first quarter, "this would result in an increase in pre-tax income by the same amount in the three months ended March 31, 2024 and the nine months ended September 30."
Capital One Financial Corp. is expected to buy Discover in one of the biggest mergers announced this year. The SEC was reviewing Discover's financial statements in connection with the pending merger, according to the filing.
A representative for Discover declined to comment beyond the filing. A representative for Capital One didn't immediately respond to a request for comment.
A late financial statement can be considered a financial reporting red flag and large companies go to great lengths to avoid missing SEC deadlines. In the filing Wednesday, Riverwoods, Illinois-based Discover said it likely won't file under the allotted extension period of five calendar days because it needs more time to address the issues. The company also hasn't determined if it will have to redo, or restate, its prior financial statements to address any potential accounting errors, it said.
