In deciding how to recognize prior period cost, accounting regulators opted to recognize the liability and reduce other comprehensive income, then amortize the prior service cost as a component of pension expense. The liability is reduced and other comprehensive income is increased as the prior service amount is amortized. This method was chosen in response to constituent arguments even though it violates the matching concept .

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This method was chosen because it allows for the recognition of the effects of changes in pension plans in a manner that is more reflective of the economic reality of how these costs are incurred over time, despite the fact that it may not align perfectly with the matching concept. The matching concept in accounting dictates that expenses should be recognized in the same period as the revenues they help to generate, but in this case, the approach prioritizes a different aspect of financial reporting—reflecting the timing and nature of pension plan adjustments.

In Deciding How to Recognize Prior Period Cost, Accounting Regulators