Question

Within the equity section of the balance sheet, any non-controlling or minority interests would be best described as:

Question 9 options:

A.minority shareholders in subsidiaries that have been consolidated.

B. minority interests the company has in joint ventures.

C. minority shareholders that have significant influence but less than 50 percent control.

Answer 1

The most suitable answer for this is option A

Minority shareholders in subsidiaries that have been consolidated.

Non-controlling interest (NCI), also known as minority interest, is an ownership position whereby a shareholder owns less than 50% of outstanding shares and has no control over decisions. Non-controlling interests are measured at the net asset value of entities and do not account for potential voting rights.

Factoring in Consolidations

A consolidation is a set of financial statements that combines the accounting records of several entities into one set of financials. These typically include a parent company, as the majority owner; a subsidiary, or purchased firm; and an NCI company. The consolidated financials allows investors, creditors, and company managers to view the three separate entities as if all three firms are one company.

• The second option is incorrect as if a company do a business in form of joint venture it will always have a significant influence (control) in venture.

• The third option is incorrect because For the majority of publicly traded companies, the number of outstanding shares is so large that an individual investor cannot influence the decisions of senior management. It is generally not until an investor controls 5 to 10% of the shares that he vie for a seat on the board or enact changes at the shareholders' meetings through lobbying efforts.