How are unrecognized gains and losses amortized to net periodic pension cost under US GAAP?

Under US GAAP, unrecognized gains and losses that arise from pension plans are amortized to net periodic pension cost using the corridor approach. This method recognizes that not all gains and losses should be immediately recognized in income, allowing for smoother and more manageable expense fluctuations over time.

The corridor approach involves creating a "corridor" or threshold based on the larger of 10% of the projected benefit obligation (PBO) or the fair value of plan assets. When the unrecognized gains or losses exceed this threshold, only the excess amount is amortized into the net periodic pension cost over the average remaining service period of the employees. This ensures that recognition of gains and losses is gradual, rather than causing abrupt changes in the pension expense that could misleadingly affect financial statements.

The other methods listed, while potentially relevant in discussions of pension accounting, do not apply specifically to how unrecognized gains and losses are handled in regard to amortization. The straight-line method might sound straightforward, but it does not account for the specific thresholds set by the corridor approach. The projected unit credit method is primarily concerned with calculating the pension obligation rather than the amortization of gains and losses. Lastly, the accrued liability approach does not relate to the method of gain or loss amort