NEW YORK (Reuters) - The type of accounting Boeing Co uses to reflect the enormous upfront costs of building its jetliners is unusual among large U.S. corporations and leaves a lot of judgment up to the company, accounting experts said.

A Boeing 737 MAX sits outside the hangar during a media tour of the Boeing 737 MAX at the Boeing plant in Renton, Washington December 8, 2015. REUTERS/Matt Mills McKnight

Shares in Boeing plunged as much as 11 percent on Thursday amid slowing sales and a report that securities regulators were investigating the company’s accounting. Shares closed up 0.2 percent on Friday during a broad market rally.

The U.S. Securities and Exchange Commission is looking into Boeing’s use of a practice known as program accounting, Bloomberg reported on Thursday, citing people with knowledge of the matter. It was unclear whether the SEC would file any charges against Boeing. The SEC declined to comment.

Boeing declined to comment on the reported SEC probe or its use of program accounting.

Program accounting was historically used in the U.S. aerospace industry for decades as a way to spread billions of dollars in development costs over multiple years. The technique cuts the cost per plane in the early stages of a project, smoothing profit margins over time.

The method is recognized under generally accepted accounting principles (GAAP), and accountants have justified it by arguing that the upfront costs have a future “learning curve” benefit that should be reflected somehow.

Boeing, which is the only U.S. commercial plane maker, appears to be alone in using program accounting. Accountants said they were not aware of other U.S. companies that employ it, and defense contracts are not handled that way because they have a different structure than airplane sales.

McDonnell Douglas, which was acquired by Boeing in 1997, had been among the companies that used program accounting in the 1990s, according to media reports at the time.

Under guidance proposed in 1981 by the American Institute of Certified Public Accountants, program accounting may be used only under a very narrow set of circumstances involving a recurring product that requires substantial investment and has high barriers to market entry.

The method can go wrong if a company either initially overestimates the number of airplanes it plans to sell or its costs are significantly higher than planned, accountants said. Either scenario results in miscalculating the company’s margin.

Because of the estimates, “you have to accept a great deal of subjectivity,” said Robert Willens, a corporate tax and accounting consultant in New York.

Because the company has the relevant information, “it’s hard for an outsider to criticize anything other than the sheer amount of costs that are capitalized,” he said.

Boeing has warned it might face about $9.7 billion in charges for the 787 and 747 programs if it cannot sell more of both aircraft. The company has more than $30 billion in deferred production and tooling costs that it has not yet charged against its income statement.

Accounting is not a hard and fast science, and subjectivity comes into play in many areas.

Program accounting, though, has become less common as a result of consolidation in the aerospace industry, and it is not the way that companies in other industries deal with large, early costs in a project.

Even at Boeing there have been discussions about eliminating program accounting, a company spokesman told The New York Times in 1998. Boeing has stuck with it, even after it paid $92.5 million in 2002 to settle a securities fraud suit related to its accounting of costs. Boeing denied wrongdoing in the case.

Boeing includes lengthy discussions of program accounting in its quarterly filings with the SEC.

GAAP requires periodic assessments to make sure cost estimates are correct. If costs are more than originally estimated and a company is in a loss position, it is generally required to recognize that loss.

Another accounting practice that is more common, known as percentage-of-completion accounting, is something of a mirror image of program accounting and is also used by companies with large, upfront costs.

That practice allows certain companies, such as one that is constructing a unique building, to recognize revenue from the project as it is moving along rather than only at the project’s completion. Lockheed Martin Corp, a defense contractor, is among the companies that use percentage-of-completion accounting, according to its securities filings.