Nuland International Corporation recently acquired 40 percent of Scott Trading Company and appropriately accounts for this investment under the equity method. Nulands corporate controller is in the process of determining the companys operating segments for purposes of preparing financial statements for the current year. He has determined that the investment in Scott meets the definition of an operating segment (i.e., Scott earns revenues and incurs expenses, Nulands chief operating officer regularly reviews Scotts operating results, and Scott provides Nuland with a complete set of financial statements). However, because Nuland does not control Scott, the controller is not sure whether the investment in Scott can be considered a separate operating segment.

Required

Search current U.S. authoritative accounting literature to determine whether an equity method investment can be treated as an operating segment for financial reporting purposes. If so, explain the conditions under which this would be possible. Identify the source of guidance for answering this question.