Non-controlling interest definition

What is a Non-Controlling Interest?

A non-controlling interest is an ownership position in a corporation that is not sufficiently large for an investor to exercise operational control over the entity. The bulk of all investors have a non-controlling interest, since the number of shares they own in proportion to the total is so small.

A non-controlling interest does not have to be one that has less than 50% of the shares outstanding. A lesser proportion of ownership can result in a person acquiring a board seat, which does provide a measure of control.

Presentation of a Non-Controlling Interest

An investor with a non-controlling interest does not consolidate the results of the investee with its own financial statements . Consolidation refers to the process of combining the financial statements of several entities in order to produce one set of financial statements. When an investor does have a controlling interest, then it must present consolidated financial statements from which inter-company transactions have been stripped out.