Accounting for prior service cost prospectively would violate the matching concept because all the services performed by the employees were completed in previous periods.

Question

Quizplus · Accepted Answer

The matching concept in accounting dictates that expenses should be recognized in the period in which the related revenues are earned. Since the services by the employees (leading to prior service cost) were performed in previous periods, recognizing these costs prospectively (in future periods) would violate this principle, as it mismatches the expense recognition with the period in which the related services were provided.

Accounting for Prior Service Cost Prospectively Would Violate the Matching