ASX-listed, New Zealand-based coal miner Bathurst Resources has come out swinging against its auditor PriceWaterhouseCoopers over accounting treatments used in its full-year results, saying it would have reported a significantly worse loss if PwC got its way.

The issue relates to the accounting treatment of Bathurst’s (ASX:BRL) convertible notes and redeemable convertible preference shares (issued in July 2016 and February 2017 respectively).

A convertible instrument is a type of bond that can convert into a specified number of shares in the issuing company or cash of equal value. The debt must be settled by exchanging a fixed amount of cash for a fixed number of shares — known as the fixed for fixed test.

Bathurst argues PwC’s method of measuring the convertible instruments would have delivered a $17 million net loss for the financial year versus the $1.9 million loss that was reported in its financials — with the $15.1 million difference being a net increase in its liabilities.

Confusing matters further, New Zealand-focused Bathurst uses Kiwi dollars as its primary currency while its convertible instruments are in Aussie dollars.

The currency confusion raises the questions over the fixed-for-fixed test because Aussie dollars must be converted into Kiwi dollars for financial reporting purposes.

According to Bathurst, the conversion of the instruments into equity does meet the test since both the fixed amount of debt and fixed amount of Bathurst’s equity are in Aussie dollars.

However, PwC disagreed, saying the accounting treatment used on the convertible instruments no longer met the test. The accounting giant then issued a “qualified audit report” — a report issued when the auditor encounters situations which do not comply with generally accepted accounting principles.

“A difference in opinion between management and Bathurst’s auditors on how to value the conversion feature implicit in the convertible notes and redeemable convertible preference shares issued during the year has led to PwC issuing a qualified audit report,” Bathurst said in its FY17 results.

Bathurst said it made full disclosure of the accounting treatment applied to the instruments and believes the company provided a fair presentation of the convertible instruments and the financial performance of the company.

“The directors maintain that the accounts provide a fair presentation of the financial performance and financial position of Bathurst as at 30 June 2017,” the company reported on Friday.

“Bathurst is not aware of any other issues with the accounts.”

The convertible instruments were issued by Bathurst to fund its investment in BT Mining, a joint venture in which Bathurst owns 65 per cent.

For a full technical overview of how the convertible instruments were interpreted by PwC and Bathurst, click on the announcement here.

Shares in Bathurst closed 10 per cent higher at 16c on Friday, valuing the company at around $133 million.