in case anyone else was wondering, here's the answer:
The passage at the bottom of page F8-34 states that “some prior service costs are accounted for as deferred outflows and deferred inflows”
The key word there is “some”
The GASB accounting for pensions looks like IFRS. Prior service costs are expensed to the extent that they have already been earned by the employee. Prior service costs are only deferred to the extent that they have yet to be earned. So US GAAP for commercial accounting is the last place where prior service costs are uniformly deferred.
In your question, we have a plan amendment resulting in a $200,000 change to the liability. That plan amendment is a classic prior service cost transaction. Under US GAAP we would defer the whole thing.
But this is governmental accounting and the question goes on to say that that $150,000 of that $200,000 increase relates to prior service. Not prior service costs, prior service. What the question is stating is that $150,000 of that $200,000 has already been earned by employees with their prior service. So we will expense the $150,000 and defer the remaining $50,000.
That point is not crystal clear in the outline, so we try and make the point in the explanation to the question. The discussion of the notes to the pension financial statements beginning on page F8-74 touches on this issue, but does not specifically state what I have described above.
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