Noncontrolling Interest in Income

In this article, we cover Noncontrolling Interest in Income. But, before that, we need to understand the relationship between a parent/holding company and its subsidiary.

A parent company is a company that can influence the business operations of another company by holding more than 50% of the outstanding voting shares. On the other hand, the company that is controlled by its parent company is its subsidiary.

So, there will be controlling interest and noncontrolling interest in the subsidiary.

Noncontrolling Interest in Income

Noncontrolling interest is that portion of the equity in the subsidiary which isn’t assigned to the parent company. So, this lets the parent company consolidate its subsidiaries’ financial results into its own.

Furthermore, there are mainly two classes of owners that hold a stake in a subsidiary company:

1. those who hold the controlling interest (shareholders that hold more than 50% of the outstanding voting shares),
2. those who hold the noncontrolling interest.

When the parent company releases an Earnings Report, it has to provide separate details about income/loss that is attributable to the non-controlling interest group. It is reported just below the Net Income/Loss item in Condensed Consolidated Statements.

For instance, for the XYZ Company Shareholders, it would be (Dollars in millions):

Similarly, we can also calculate it for the company that is making profits. All we have to do is, take the net income attributable to noncontrolling interest out from the Net Income/Loss. Now, consider the example where the same company is making profits and see how net income is attributed to the XYZ company shareholders.

Noncontrolling interest helps us analyze the parent company better.

In conclusion, we have covered Noncontrolling interest in Income here.