There is a statement that I do not get in the question sets of the institute, _ US GAAP allows the option of recording an equity method investment at fair value with the gains and losses going to profit and loss. _
Unrealized gain from the change in fair value:
($37.60 – $35.00) × 4 million shares = $10.4
$1.20/share × 4 million shares = 4.8
Total investment income = $15.2
What I have studied is that equity method income is recorded as N.I*the company’s ownership % which is recorded in the income statment.
As for the carrying value, it is the original price+earnings -dividends
But why would I calculate the unrealized gain or loss!!