Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2025

Summary of Significant Accounting Policies


NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Capital One Financial Corporation, a Delaware corporation established in 1994 and headquartered in McLean, Virginia, is a diversified financial services holding company with banking and non-banking subsidiaries. Capital One Financial Corporation and its subsidiaries (the “Company” or “Capital One”) offer a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels.

As of September 30, 2025, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National Association (“CONA”). On May 18, 2025 (the “Closing Date”), Discover Financial Services (“Discover”) merged into Capital One and Discover Bank merged into CONA. See “Note 2—Business Combinations and Discontinued Operations” for additional information. The Company is hereafter collectively referred to as “we,” “us” or “our.” CONA is referred to as the “Bank.”

We offer credit cards, debit cards, bank lending, treasury management and depository services, auto loans, and other consumer lending products in markets across the U.S. We service banking customer accounts through digital channels and our network of branch locations, cafés, call centers and automated teller machines (“ATMs”). Additionally, through the acquisition of Discover, we acquired new products including personal loans as well as the Discover Network, the PULSE Network, Diners Club International (“Diners Club”) and Network Partners (collectively, the “Global Payment Network”). The Discover Network processes transactions for credit and debit cards issued on its network and provides payment transaction processing and settlement services. The PULSE Network operates an electronic funds transfer network, providing financial institutions issuing debit cards on the PULSE Network with access to ATMs domestically and internationally, as well as merchant acceptance throughout the U.S. for debit card transactions. Diners Club is a global payments network of licensees, which are generally financial institutions, that issue Diners Club-branded charge cards and/or provide card acceptance services. We also have agreements with a number of financial institutions, financial technology firms, networks, network-to-network partners and other commercial service providers (collectively, “Network Partners”) for the provision of card issuing, payments processing and related services on the Global Payment Network.

We also offer credit card products and certain other services outside of the U.S. through Capital One (Europe) plc (“COEP”), an indirect subsidiary of CONA organized and located in the United Kingdom (“U.K.”), and through a branch of CONA in Canada. Both COEP and our Canadian branch of CONA have the authority to provide credit card loans. In addition, we offer Global Payment Network services globally.

Our principal operations are organized for management reporting purposes into three major business segments, which are defined primarily based on the products and services provided or the types of customer served: Credit Card, Consumer Banking and Commercial Banking. We provide details on our business segments, the integration of any recent material acquisitions into our business segments, and the allocation methodologies and accounting policies used to derive our business segment results in “Note 13—Business Segments and Revenue from Contracts with Customers.”

Basis of Presentation and Use of Estimates

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”). The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and in the related disclosures. These estimates are based on information available as of the date of the consolidated financial statements. While management makes its best judgments, actual amounts or results could differ from these estimates. In the opinion of management, all normal, recurring adjustments have been included for a fair statement of this interim financial information.

These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements, and related notes thereto, included in Capital One Financial Corporation’s 2024 Annual Report on Form 10-K (“2024 Form 10-K”). We have described relevant updates to the significant accounting policies presented in 2024 Form 10-K below. Such updates are primarily a result of the Transaction (as defined below).

Discount and Interchange Income

Discount and interchange income represents the amounts we earn and retain from transactions between cardholders and merchants on credit and debit card products. Contractually defined per-transaction fee amounts typically apply to each type of transaction processed. We recognize discount and interchange income upon settlement.

Discount income represents the amount we charge merchants with whom we have entered into card acceptance agreements for processing credit card purchase transactions. We stand ready to process payment transactions as and when a transaction is presented.

Generally, interchange income is earned from two sources. We earn acquirer interchange income primarily from merchant acquirers on Discover Network, Diners Club and PULSE Network transactions made by credit and debit card customers at merchants with whom merchant acquirers have entered into card acceptance agreements for processing payment card transactions. Under these agreements, we stand ready to process payment transactions as and when each is presented. We also earn interchange income as a card issuer in the form of a fee for standing ready to authorize and providing settlement on credit and debit card transactions processed through the Mastercard® (“Mastercard”) and Visa® (“Visa”) interchange networks. The levels and structure of interchange rates we earn as a card issuer are set by Mastercard and Visa and can vary based on cardholder purchase volumes, among other factors.

We pay issuer interchange to card issuing entities that have entered into contractual arrangements to issue cards on the Discover Network and on certain transactions on the Diners Club and PULSE networks. This cost is contractually established and is based on the card issuing organization’s transaction volume. We present this cost as a reduction of discount and interchange income. We accrue for the cost at the time each underlying card transaction is captured for settlement. See “Note 13—Business Segments and Revenue from Contracts with Customers” for additional details.

Other Intangible Assets

Intangible assets with finite useful lives are amortized on either an accelerated or straight-line basis over their estimated useful lives and are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Intangible assets that have indefinite useful lives are not amortized, but are tested for impairment annually or more frequently if adverse circumstances indicate that it is more likely than not that the carrying amount of the asset exceeds its fair value. See “Note 7—Goodwill and Other Intangible Assets” for additional information.

Income Taxes

Our effective tax rate in the third quarter of 2025 was computed utilizing the annual method. We changed our methodology from the year-to-date method utilized in the second quarter of 2025 due to the return of the proportional relationship between our tax provision, tax credit investments and pre-tax income.