Minority interest

Minority interest (also known as Non-controlling interest) in business is an accounting concept that refers to the portion of a subsidiary corporation's stock that is not owned by the parent corporation. The magnitude of the minority interest in the subsidiary company is generally less than 50% of outstanding shares, else the corporation would generally cease to be a subsidiary of the parent.^[1] It is, however, possible (e.g. through special voting rights) that a controlling interest requiring consolidation be achieved without exceeding 50% ownership depending on the accounting standards being employed. Minority interest belongs to other investors and is reported on the consolidated balance sheet of the owning company to reflect the claim on assets belonging to other, non-controlling shareholders. Also, minority interest is reported on the consolidated income statement as a share of profit belonging to minority shareholders.

Minority interest is an integral part of the enterprise value of a company. The converse concept is an associate company.

Under IFRS the minority interest (non-controlling interest) is reported in the Equity section of the consolidated balance sheet. Under US GAAP, minority interest can be reported in the liabilities section, the equity section, or the mezzanine section of the balance sheet. The Mezzanine section is located between liabilities and equity. FASB FAS 160 and FAS 141r significantly alter the way a parent company accounts for NCI in a subsidiary. It is no longer acceptable to report minority interest in the Mezzanine section of the balance sheet.

See also

External links

• Minority Interest
• Minority Interest at Investopedia.com
• Minority Interests on the Income Statement—The Cost Method, Equity Method, and Consolidated Method

References