Financial Restatements Alert in the S&P500

Discover Financial Services Financial Restatement

Discover Financial Services (DFS) has announced a decision to restate certain prior period financial statements. This decision follows a notice from the New York Stock Exchange (NYSE) regarding the company's non-compliance due to a delay in filing its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024 " .

Details of the Restatement

The restatement involves adjustments to the company's financial statements for the fiscal years ended December 31, 2023, and 2022, as well as for the interim periods in 2023 and 2024. The restatement is primarily due to the misclassification of certain credit card accounts, which led to an incorrect revenue recognition " .

• Impact on Financials: The restated financial statements are expected to show an increase in assets by $190 million, an increase in liabilities by $783 million, and a decrease in retained earnings by $593 million as of December 31, 2023. Pre-tax income for 2023 and 2022 will be reduced by $190 million and $77 million, respectively " " .

• Reason for Restatement: The restatement is necessary to correct the revenue recognition related to the card product misclassification, which was initially recorded as a $365 million liability. This amount has been revised to approximately $1,047 million following discussions with the SEC " " .

Potential Effects on the Company

The restatement could affect investor confidence and the company's stock price due to the perceived instability in financial reporting. However, the company is taking steps to address these issues, including revising its internal controls over financial reporting " .

The restatement also impacts the ongoing merger with Capital One, as the financial statements need to be accurate for the merger process to proceed smoothly " .

Conclusion

Discover Financial Services is actively working to file the restated financial statements and address the issues raised by the NYSE and SEC. The company aims to complete these filings by the end of the year, although the exact timing is uncertain " " .

Investors are advised to monitor the situation closely as the company works through these financial adjustments and the implications for its merger with Capital One.

Financial Restatement Alert: Archer-Daniels-Midland Company (ADM)

Date of Announcement: November 4, 2024

Details of the Restatement: Archer-Daniels-Midland Company (ADM) has announced that it will restate its financial statements for fiscal year 2023 and the first two quarters of 2024. This decision follows discussions with the U.S. Securities and Exchange Commission and is due to errors in segment information disclosure. The restatement will address intersegment sales that were either not in accordance with prior disclosures or misclassified as intrasegment sales. These errors were identified during the testing of new controls implemented to remediate a previously identified material weakness in the company's internal control over financial reporting " .

Potential Effects on the Company: The restatements are not expected to materially impact ADM's consolidated financial statements, including earnings, comprehensive income, balance sheets, cash flow, or shareholders' equity. However, the company is actively working on enhancing its internal controls and has provided training to relevant personnel to prevent future errors. The management is also in discussions with its independent registered public accounting firm, Ernst & Young LLP, to ensure the accuracy and integrity of its financial reporting " .

Forward-Looking Statements: ADM has issued cautionary notes regarding forward-looking statements, highlighting the risks and uncertainties involved. These statements are not guarantees of future performance and are subject to change based on various factors " .

Conclusion: ADM is taking significant steps to address the identified issues and improve its financial reporting processes. The restatement is a proactive measure to ensure compliance and accuracy in its financial disclosures.

For more detailed information, please refer to the company's official filings and announcements.

Financial Restatement Alert: Stanley Black & Decker, Inc.

Date of Announcement: January 24, 2022

Details of the Restatement: Stanley Black & Decker, Inc. has announced that it will restate its previously issued financial statements for the three-year period ended January 2, 2021, as well as unaudited interim financial statements for the periods ended April 3, 2021, July 3, 2021, and October 2, 2021. This decision follows a re-evaluation of the accounting for Equity Units issued in May 2017 and November 2019, prompted by comments from the SEC. The company identified errors in the accounting treatment of these units, specifically in the calculation of diluted earnings per share and the unit of account for the forward stock purchase contracts and convertible preferred stock " .

Impact on Financial Statements: The restatement will correct the errors related to the unit of account and the diluted earnings per share amounts. However, it will not affect the company's historical net earnings or compliance with financial covenants in its debt instruments " .

Potential Effects on the Company:

• Earnings Per Share Adjustments: The restatement will result in a reduction of both GAAP and non-GAAP diluted earnings per share for the affected periods. For example, the diluted GAAP earnings per share for the fiscal year ended January 2, 2021, will be reduced by $0.31 " .
• Internal Control Weaknesses: The company has identified material weaknesses in its internal control over financial reporting related to these errors. A remediation plan will be detailed in the amendments to the financial statements " .

Next Steps: The company plans to file amendments to its 2020 Form 10-K and Q3 2021 Form 10-Q with the SEC to reflect these changes " .

This restatement highlights the importance of accurate financial reporting and the potential implications of accounting errors on a company's financial statements and investor confidence.