Minority interest

A significant but non-controlling ownership of less than 50% of a company's voting shares by either an investor or another company. Also, a minority interest account is a non-current liability that can be found on a parent company's balance sheet that represents the proportion of its subsidiaries owned by minority shareholders.

Investopedia Says:
In accounting terms, if a company owns a minority interest in another company but only has a minority passive position (i.e. it is unable to exert influence), then all that is recorded from this investment are the dividends received from the minority interest. If the company has a minority active position (i.e. it is able to exert influence), then both dividends and a percent of income are recorded on the company's books.

As for the minority interest account, an example would be if ABC Corp owns 90% of XYZ inc, which is a $100 million company. On ABC Corp's balance sheet, there would be a $10 million liability in minority interest account to represent the 10% of XYZ inc. that ABC Corp does not own.

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Interest of shareholders who, in the aggregate, own less than half the shares in a corporation. On the consolidated balance sheets of companies whose subsidiaries are not wholly owned, the minority interest is shown as a separate equity account or as a liability of indefinite term. On the income statement, the minority's share of income is subtracted to arrive at consolidated net income.

Ownership of less than 50% of an entity. See Minority Discount.

Minority 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 always less than 50% of outstanding shares, else the corporation would cease to be a subsidiary of the parent.^[1] 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 and US GAAP, the minority interest is reported in the equity section of the consolidated balance sheet.

See also

Associate company, the converse concept Articles of Incorporation Business valuation Consolidation (business) Drag-Along right

Equity method Pre-emption right Share capital Tag-Along right Voting interest

External links

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

References

1. ^ http://www.groco.com/readingroom/bus_dloc_mid.aspx The Minority Interest Discount

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