Noncontrolling Interest (NCI)
Understanding Minority Ownership
A noncontrolling interest represents the equity ownership in a subsidiary that is not attributable to the parent. Even though the parent controls the subsidiary, outside shareholders continue to own part of the subsidiary's equity.
- Reported within equity.
- Receives its share of subsidiary income.
- Receives its share of dividends.
- Measured initially at fair value.
Tip
Always separate consolidated net income attributable to the parent from income attributable to noncontrolling interests.
Summary
NCI reflects ownership rights of external shareholders while preserving the concept of a single reporting entity.