@NYC, from the Becker book:
Prior service cost and pension losses decrease the funded status of the pension plan and are recorded with the following journal entry in the period incurred:
DR: OCI
CR: Pension benefit asset/liability
A deferred tax asset may also be recognized because prior service cost and pension losses increase the PBO and therefore increase the total contributions that the company must make to fund the pension plan. When these contributions are made (generally in a future period given that most defined benefit plans are underfunded) the company will take a tax deduction for the contribution, decreasing future taxes. The related deferred tax benefit must be recognized in OCI as an offset to the unrecognized prior service cost or pension loss. All elements of OCI are reported net of tax.
Journal entry to record the deferred tax asset:
DR: Deferred tax asset
CR: Deferred tax benefit – OCI
Amortization to Pension Expense – when prior service cost, pension losses, and any remaining transition obligation are amortized, they are reclassified out of AOCI and recognized as a component of pension expense.
DR: Net periodic pension cost
CR: OCI
The related deferred tax benefit must be removed from AOCI and recorded in the income statement.
DR: Deferred tax benefit – OCI
CR: Deferred tax benefit – Income Statement
(I typed this up super fast because I have a meeting, so please forgive any typos — but I double checked the J/Es to make sure I didn't make any mistakes on them.)
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