The difference between investee earnings and investee dividends is the amount of earnings accruing to the investor that the investee retained, or the unremitted earnings of the investee. Thus, the equity-based investment account is equal to the original investment plus the investor’s proportionate share of the investee’s cumulative retained earnings since the invest- ment was made. In this sense, the equity method represents an extension of accrual account- ing to investments in common shares. However, the balance sheet doesn’t reflect the cost of the investment anymore. This number isn’t market value, either, and is hard to interpret. EXTRAORDINARY ITEMS AND DISCONTINUED OPERATIONS When the investee reports extraordinary items,.
