Top firms get tough on accounting for losses

The latest changes to US accounting regulations, pushing for consistency in
corporate reporting, have resulted in some accounting firms interpreting the
rules more aggressively than others, which banks say risks inconsistency and
investor confusion.

Following the collapse of US credit markets and subsequent stock market
decline slashing the value of many investments, some publicly traded companies
have accounted for their losses but others still have to record their lower
market value,

KPMG has been particularly aggressive, insisting its regional bank clients
write down the lost value of their preferred stock investments in Fannie Mae and
Freddie Mac, according to Keefe, Bruyette & Woods bank analyst Samuel

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

Further reading:

SEC unveils roadmap for IFRS by 2014

Bank profits halved as write-downs cause further

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Fiona Westwood of Smith and Williamson.