Question

What does the term “non-controlling” interest mean? How is the non-controlling interest in a subsidiary company calculated as of the end of a reporting period?

Answer 1

Non-controlling interest mean the percentage of shares which are not held or purchased by parent company. These are shares in which parent does not have control and thus they are non-controlling interest. Non-controlling interest is also known as minority interest.

The non-controlling interest in subsidiary company is calculated based on percentage shares held by these non-controlling shareholders. Non-controlling interest is calculated in terms of share in equity of the company and net income of the subsidiary company. Share in equity of subsidiary company is calculated as book value of equity multiplied by non-controlling interest percentage and this reported separately in the equity section as non-controlling interest share. Share in net income is calculated as total net income of subsidiary multiplied by non-controlling interest percentage which give non-controlling interest in net income. This is reported as separately in net income as net income attributable to non-controlling interest.