When an investment is accounted for using the Equity Method, how are the investor's share of the investee's income from non-operating sources (such as gains or losses from discontinued operations) to be accounted for by the investor?

Question

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When using the Equity Method, gains or losses from non-operating sources of the investee (such as gains or losses from discontinued operations) are shown separately on the investor's Income statement, net of tax, below income from operations. The investor's pro rata share of these after-tax gains and losses are added to or deducted from the Investment account. This method ensures that the investor's share of the investee's overall performance is accurately reflected on the investor's financial statements, while also keeping the non-operating gains or losses separate for disclosure purposes.

When an Investment Is Accounted for Using the Equity Method