Final answer:
The fair value option differs for investments based on their categorization. Trading and available-for-sale securities are affected by elections of fair value option, while held-to-maturity investments have limited applicability. However, the equity method does not involve fair value accounting unless impairment or sale intentions arise.
Step-by-step explanation:
The question concerns the accounting treatment of unrealized holding gains and losses and specifically how they are handled across different types of investments when the fair value option is elected. It's important to understand how various investment categories such as held-to-maturity, trading, available-for-sale, and investments accounted for using the equity method are treated in financial accounting.
Investment in a held-to-maturity security represents the intention to hold the investment until it matures and thus it does not typically get remeasured to fair value unless impaired. A trading security, on the other hand, is always measured at fair value with unrealized gains and losses running through earnings. For an available-for-sale security, unrealized gains and losses are usually reported in other comprehensive income, unless the fair value option is elected, which then also routes them through earnings.
The correct answer is that the fair value option does not apply to investments accounted under the equity method, unlike the other types of securities mentioned.