(v2420.03) Earnings from Investments: Equity Method

Nonoperating Income Statement item accounts for the after-tax earnings from investments in unconsolidated subsidiaries in which the investing company holds at least 20% but less than 50% of the stock. Under the Equity Method, specified in APB 18, the investing company's proportionate share of the subsidiary's net income is included in the investing company's Net Income (v1750). For reporting purposes, the Balance Sheet investment account, Investments: Equity Method (v2420), is increased by earnings recognized in income. Enter Earnings from Investments: Equity Method (v2420.03) as an after-tax amount.

Notice that a corporation that accounts for an investment using the Equity Method receives only a portion of its total earnings in cash (as dividends).