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Thursday, September 15, 2011

What is the ‘minority interest’ on the balance sheet?

‘Minority interest’ represents the equity (part ownership) of the minority share holders in the subsidiaries of a company. It is significant but non controlling ownership by investors and other companies.
Minority interest falls under share holders’ equity and not under liabilities.
If ABC Corporation buys 90% stake in XYZ inc. then 10% of the XYZ’s stake which ABC does not own shall be shown as minority interest.
Here XYZ inc. becomes a subsidiary of the ABC Corporation (following the 90% stake sell) and is controlled by the ABC Corporation.
A company having many subsidiaries adds the minority interests of all partners and shows under the share holders’ equity.

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