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 even though it violates the matching concept due to constituent arguments.

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The method described involves recognizing a liability and adjusting other comprehensive income, then amortizing the prior service cost over time, which can violate the matching principle by not aligning expenses with the periods in which they are incurred.

Accounting Regulators Opted to Recognize the Liability and Reduce Other