When an Investment Is Accounted for Using the Equity Method

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?

A) Any such gains or losses are to be charged directly to Retained Earnings net of tax.
B) Any such gains or losses are combined with revenue and expenses from operations. The investor's pro rata share of these after-tax gains and losses are added to or deducted from the Investment account.
C) Any such gains or losses are shown separately, net of tax below income from operations on the investor's Income statement. The investor's pro rata share of these after-tax gains and losses are added to or deducted from the Investment account.
D) No specific accounting treatment is required. These items simply have to be disclosed in a note to the financial statements.
Bloom's