NEW YORK (Reuters) – Recent U.S. accounting regulations have pushed for consistency in corporate reporting but some accounting firms are more aggressively interpreting the rules than others, likely leading to inconsistency and investor confusion.

The collapse of U.S. credit markets and subsequent stock market decline slashed the value of many investments held by publicly traded companies. Some companies have accounted for their losses, while others have yet to mark their positions at the lower market value.

“Why aren’t we seeing every single company caught up with (consistent accounting standards)?” said Espen Robak, president of Pluris Valuation Advisors, which values illiquid assets such as auction-rate securities. “It’s not a judgment call any more. It’s not a valuation issue any more. It’s more a matter of interpreting the accounting rules.”

Accounting and auditing firm KPMG KPMG.UL has been particularly aggressive in insisting that its regional bank clients write down the lost value of their preferred stock investments in government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, according to Keefe, Bruyette & Woods bank analyst Samuel Caldwell.

“There has been a large degree of variability in this regard, and is often related to the approach of the auditors,” Caldwell wrote in a note. “In many cases, certain auditors, such as KPMG, have been more aggressive at requiring banks to take OTTI marks on such securities.”

OTTI, or “other-than-temporary impairment” is an accounting principal which requires, in part, that the lost market value of securities be charged to income if a loss has persisted for at least six months.

A KPMG representative declined to comment.

The differences in how companies account for investments’ lost value can be confusing, or even misleading, for investors.

“Investors that own (shares or debt in) banks that have significant exposure to these securities should be concerned that these write-downs could be significant,” Caldwell said.

Insurance companies are also being hit by a reduction in net income caused by applying OTTI rules, according to Fitch analyst Julie Burke in a note to clients.

“Fitch believes weak guidance on OTTI recognition by accounting standards has resulted in significant inconsistencies among companies on what is/is not written down in their financial statements,” Burke wrote.

BIG 4 EFFECT

The largest accounting firms — PricewaterhouseCoopers PWC.UL, Deloitte Touche Tohmatsu DLTE.UL, Ernst & Young LLP ERNY.UL and KPMG — audit the bulk of the world’s biggest blue chip companies. Smaller firms include Rothstein Kass, RSM McGladrey and BDO Seidman.

An average 84 percent of companies audited by one of the so-called Big 4 have written down the value of their auction rate securities, according to a Pluris study of securities filings made by publicly traded companies in June and July. The average write-down was 11.5 percent.

In stark contrast, just 36 percent of companies whose accounting is overseen by a non-Big 4 firm took write-downs. The average discount was just 8 percent for companies that did take write-downs.

PricewaterhouseCoopers chief U.S. accountant Michael Gallagher said current market conditions have made auditors focus intensely on the possible need for investment write-downs.

“However, generally accepted accounting principals have not changed in this area and we have not reset the bar and said ‘We need to be more conservative, we need to take write downs earlier,'” said Gallagher.

“It is an area that involves a lot of judgment based on specific facts and circumstances and there are no ‘bright lines.’ Any position needs to be well thought out, well documented and with good disclosure,” he added.

Over time, companies will write down the value of their underperforming assets, analysts say. But in the meantime, uncertainty still reigns.

“Investors depend on the accuracy and timeliness of fair value measurements,” said Robak. “A balance sheet is supposed to reflect all the assets of a company and if there’s a big lag between moves in the real value of something and the accounting value of something, it’s concerning.”

(Reporting by Chelsea Emery; Editing by Derek Caney)