Minority Interest

Minority interest

An outside ownership interest in a subsidiary that is consolidated with the parent for financial reporting purposes.

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minority interest

1. In accounting, the ownership by the parent company of less than 100% of an affiliated firm.

2. A proportional ownership of a firm that is insufficient to constitute control. Generally, minority interest is viewed as ownership of less than 50% of the voting shares.

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Minority Interest

1. A percentage of ownership in a company that is significant but does not give the owner the ability to control the company. In accounting, one includes only the dividends from a minority interest on a balance sheet, unless the owner has enough ownership to exert influence (but not outright control) over the company's direction. In that case, one includes both dividends and ordinary income on the balance sheet.

2. A liability on a parent company's balance sheet indicating the amount of a subsidiary that the parent company does not own. For example, if a parent company owns 95% of a subsidiary and the remaining percentage is publicly traded, the dollar amount of that 5% is recorded as a liability on the balance sheet.

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Minority interest. All shareholders whose combined shares represent less than half of the total outstanding shares issued by a corporation have a minority interest in that corporation.

In fact, in many cases, the combined holdings of the minority shareholders are considerably less than half of the total shares.

In another example, in a partnership, any partner who has a smaller percentage than another partner is said to have a minority interest. Under normal circumstances, it is difficult for those with a minority interest to have any real influence on corporate policy.

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Minority Interest

What Does Minority Interest Mean?

(1) A significant but noncontrolling ownership of less than 50% of a company's voting shares by either an investor or another company.

(2) A noncurrent liability that can be found on a parent company's balance sheet, representing the fractional proportions of its subsidiaries owned by minority shareholders.

Investopedia explains Minority Interest

(1) In accounting terms, if a company owns a minority interest in another company but has only a minority passive position (i.e., it is unable to exert influence), the only thing 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), both dividends and a percentage of income are recorded on the company's books. (2) If ABC Corp. owns 90% of XYZ Inc.,

which is a $100 million company, ABC Corp.'s balance sheet will show a $10 million liability in the minority interest account, representing the 10% of XYZ Inc. that ABC Corp. does not own.

Related Terms:
• Balance Sheet
• Dividend
• Long-Term Debt
• Net Operating Income—NOI
• Shareholders' Equity