Month End Glossary

Non-Controlling Interest

Non-controlling interest refers to a situation where a minority ownership in a company subsidiary exists, yet it doesn't grant the holder controlling power.

Non-controlling interest represents the portion of a subsidiary's equity that is not owned by the parent company. To elaborate, when a parent company owns a majority stake in a subsidiary but less than 100%, the minority equity stake held by other investors is referred to as the non-controlling interest. Non-controlling interests appear as a separate line item under the equity section of the parent company’s consolidated balance sheet, showcasing the rightful claim of minority shareholders on the net assets of the subsidiary. For example, if Company A owns 80% of Company B, the remaining 20% ownership, held by other investors, would be classified as non-controlling interest in Company A's financial statements. The inclusion of non-controlling interests helps maintain transparency in financial reporting by highlighting ownership rights that aren't attributed to the parent entity alone. This concept ensures fair representation of stakeholders' equity.

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