Understand how non-controlling interest represents minority ownership in a subsidiary and its impact on consolidated financial statements.
Non-Controlling Interest (NCI)—also known as minority interest—represents the ownership stake in a subsidiary that is not held by the parent company. In consolidated financial statements, it reflects the portion of net assets and net profit that belongs to minority shareholders rather than the controlling entity.
NCI provides information on ownership distribution, profit allocation, and valuation aspects within group structures.
Non-Controlling Interest refers to the equity owned by shareholders who hold less than 50% of a subsidiary’s voting rights and therefore do not control its operations or strategic decisions.
It appears in the equity section of the consolidated balance sheet and represents the minority shareholders’ claim on:
Net assets of the subsidiary
Share of profits or losses
Dividend entitlement
NCI is recognised only in consolidated financial statements—not in standalone statements of the parent or subsidiary.
The basic formula for calculating NCI at the date of acquisition is:
Where:
Share of Profit = Subsidiary Profit × NCI %
Share of Dividends = Dividends Paid × NCI %
Steps to calculate NCI:
The following steps can be used to calculate NCI:
Identify minority shareholders’ ownership percentage.
Determine subsidiary net assets or profit attributable.
Apply the NCI percentage to assets, profit, or dividends.
Adjust for goodwill, fair value, or revaluation (if required).
Consider the following scenario:
Company A acquires 80% of Company B. Minority shareholders hold the remaining 20%.
Net Assets of Company B = ₹50,00,000
Annual Profit of Company B = ₹10,00,000
Dividends Paid = ₹2,00,000
NCI = 20% × ₹50,00,000 = ₹10,00,000
NCI Share = 20% × ₹10,00,000 = ₹2,00,000
NCI Dividend = 20% × ₹2,00,000 = ₹40,000
Closing NCI = 10,00,000 + 2,00,000 – 40,000 = ₹11,60,000
This amount appears in the equity section of the consolidated balance sheet.
NCI affects major financial statements as follows:
Shown under Equity as “Non-Controlling Interest”.
Represents minority owners’ residual interest in subsidiary net assets.
NCI receives a share of subsidiary profit or loss.
Parent company reports “Profit attributable to owners” separately.
Dividend payouts reduce NCI.
Revaluation and goodwill adjustments affect NCI proportionately.
Non-controlling interest can influence a parent company’s structure and strategy in the following ways:
Shared Risk: Financial risk of subsidiary operations is shared with minority shareholders.
Access to Capital: Parent companies can raise funds without full acquisition.
Strategic Support: Minority investors may bring expertise, partnerships, or networks.
Flexibility: Parent retains control without full ownership burden.
Common considerations when accounting for and reporting non-controlling interest include:
Incorrect Measurement: Errors in fair value or proportionate share calculation.
Ignoring Adjustments: Not adjusting for post-acquisition profit, dividends, or revaluations.
Misclassification: Confusing NCI with liability instead of equity.
Incorrect EPS Impact: Failing to allocate profit correctly between parent and NCI.
Not Tracking Ownership Changes: Dilution or additional investment impacts NCI calculations.
Non-Controlling Interest (NCI) plays a key role in understanding ownership distribution and financial consolidation within corporate groups. It ensures clarity on how profits and equity are shared between majority and minority stakeholders.
Key Points to Remember:
Non-Controlling Interest represents minority shareholders’ stake in a subsidiary.
It is an important part of consolidated reporting—affecting equity, profits, and valuations.
NCI calculation may use the fair value or proportionate share method.
Proper treatment ensures accurate financial transparency for investors and regulators.
Understanding NCI supports the interpretation of group-level financial information.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
Non-Controlling Interest is calculated as:
NCI = NCI % × Net Assets (or Profit) of the Subsidiary,
with adjustments made for dividends, revaluations, or other equity movements. It represents the share of net assets or earnings belonging to minority shareholders.
There is no functional difference. “Minority interest” is the older term traditionally used in accounting, while “Non-Controlling Interest (NCI)” is the terminology adopted under IFRS for clarity and consistency.
NCI does not affect earnings per share, because EPS is calculated only for the parent company’s shareholders. The portion of profit attributable to NCI is excluded before determining EPS.
Non-Controlling Interest represents the ownership stake in a subsidiary held by shareholders who do not have control over the subsidiary’s decisions. It appears in consolidated financial statements as part of equity.
A controlling interest generally arises when an investor holds more than 50% of voting rights, giving decision-making control. A non-controlling interest refers to an ownership stake of less than 50%, without authority over strategic or operational decisions.
When allocating a subsidiary’s profit between the parent and NCI, a typical entry is:
Profit and Loss A/c........Dr
To Non-Controlling Interest
To Parent’s Equity
This records the distribution of earnings to both the parent and the minority shareholders.
Anshika brings 7+ years of experience in stock market operations, project management, and investment banking processes. She has led cross-functional initiatives and managed the delivery of digital investment portals. Backed by industry certifications, she holds a strong foundation in financial operations. With deep expertise in capital markets, she connects strategy with execution, ensuring compliance to deliver impact.
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