BC7 The previous version of IAS 23 permitted two treatments for accounting for borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. They could be capitalised or, alternatively, recognised immediately as an expense. SFAS 34 requires the capitalisation of such borrowing costs.

BC8 The Board proposed in the exposure draft to eliminate the option of immediate recognition as an expense. Many respondents disagreed with the Board's proposal in the exposure draft, arguing that:

(a) borrowing costs should not be the subject of a short‑term convergence project.

(b) the Board had not explored in sufficient detail the merits of both accounting options.

(c) the proposal did not result in benefits for users of financial statements because:

(i) it addressed only one of the differences between IAS 23 and SFAS 34.

(ii) comparability would not be enhanced because the capital structure of an entity could affect the cost of an asset.

(iii) credit analysts reverse capitalised borrowing costs when calculating coverage ratios.

(d) the costs of implementing the capitalisation model in IAS 23 would be burdensome.

(e) the proposal was not consistent with the Board's approach on other projects (in particular, the second phase of the Business Combinations project).