Noncontrolling Interest

When a parent controls a subsidiary but owns less than 100% of it, the parent still consolidates all of the subsidiary's assets, liabilities, income and expenses. The share that belongs to the outside shareholders is shown separately as noncontrolling interest.

For example, a parent owns 80% of a subsidiary that earns net income of 1 million. The consolidated income statement includes the full 1 million, but shows 800,000 as attributable to the parent's shareholders and 200,000 as attributable to the noncontrolling interest.

On the consolidated balance sheet, noncontrolling interest appears within equity but separately from the equity belonging to the parent's shareholders.

Analysts need to adjust for noncontrolling interest when valuing companies. Enterprise value calculations typically add it, because the consolidated figures for revenue, EBITDA and debt include 100% of partly owned subsidiaries. Earnings per share uses only the profit attributable to the parent's shareholders.

Note: Minority interest is an older name for noncontrolling interest. The two terms describe the same thing.