Non-Controlling Interest

A non-controlling interest is an equity interest in a subsidiary company that is not owned by the controlling company. Non-controlling interests give the non-controlling shareholders the ability to exert influence over the subsidiary company but not control over its operations.

Key points about non-controlling interests:

• Minority interest: Non-controlling interests are sometimes called minority interests because they are often held by minority shareholders in a company.
• Influence, not control: Non-controlling shareholders have the ability to exert influence over the subsidiary company through their voting rights, but they do not have the ability to control its operations.
• Separate financial statements: The subsidiary company is required to prepare separate financial statements for each non-controlling interest. These financial statements are consolidated with the controlling company’s financial statements.
• Disclosed separately: The controlling company is required to disclose information about non-controlling interests in its financial statements. This information includes the name of each non-controlling shareholder, their ownership percentage, and their voting rights.
• Accounting treatments: Non-controlling interests are accounted for differently depending on the type of control that the non-controlling shareholder has over the subsidiary company.

Here are some examples of non-controlling interests:

• A parent company owns 80% of the shares in a subsidiary company. The remaining 20% of the shares are owned by non-controlling shareholders.
• A company has a 20% ownership interest in another company. This ownership interest gives the company the ability to exert influence over the other company, but not control over its operations.

Non-controlling interests are an important part of consolidated financial statements. They can provide valuable information about the ownership and control of subsidiaries.