In the accounting linkage described, an increase in the liability requires an equal decrease in retained earnings and net income.

“... on the P&L flows to retained earnings on the equity value of your balance sheet. And so what has to happen, as that liability has gone up, retained earnings has to go down by the same amount, which basically means net income has to go down by the same amount because net income on the P&L flows to retained earnings on the balance sheet.”