Minority interest represents shares owned by third parties when Company A acquires Company B. In other words, minority interest represents the equity interest of outside shareholders in consolidated subsidiaries. Under GAAP, if Company A owns 50% or more of Company B, the two companies are treated as if they were one for financial statement purposes. Thus an account – namely, minority interest – must be presented to indicate that not all the assets and liabilities are related to Company A, the parent company. Minority interest ordinarily appears on the balance sheet between liabilities and shareholders equity. On the income statement, minority interest in the income of a consolidated subsidiary is shown as a deduction of consolidated net income. If Company A has a minority interest of less than 50% in Company B, then minority interest does not appear on the balance sheet or income statement of Company A, and other methods are used to account for its minority interest. |
