When a company amends a pension plan, for accounting purposes, prior service costs should be

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Prior service costs (PSC) should be recorded in the other comprehensive income section of the balance sheet and are not reported as an expense on the income statement. This is because the costs relate to benefits that have already been earned by employees in prior periods, and the company is only now recognizing the cost through the amendment of the pension plan. Amortization of the PSC will occur over the remaining service lives of the affected employees, and any gains or losses on the plan will also be recorded in other comprehensive income.

When a Company Amends a Pension Plan, for Accounting Purposes