Definition
When a parent controls a subsidiary but owns less than all of it, the portion held by others is a noncontrolling interest. ASC 810-10 requires it to be presented within equity in the consolidated balance sheet, separately from the parent's equity and clearly labeled. Consolidated net income is attributed between the parent and the noncontrolling interest, and both amounts are shown on the face of the income statement.
Why it matters in an audit or review
Errors in attribution misstate earnings of the parent and equity. Auditors recompute the share of income and other comprehensive income, test changes in ownership that do not alter control, and check that contractual features such as put rights are assessed for classification. Losses can be attributed to a noncontrolling interest even when the balance becomes negative.
Example
Illustrative: a parent owns 80% of a subsidiary that reports net income of $200,000. The parent's share is $160,000 and the noncontrolling interest's share is $40,000. If the subsidiary pays a $50,000 dividend, the noncontrolling interest receives $10,000 and its equity balance falls by that amount.
Common mistakes
- Treating the noncontrolling interest as a liability or as mezzanine without analysis of its terms.
- Eliminating intercompany profit against the parent only, without applying the attribution policy.
Sources
- FASB ASC 810-10-45, Consolidation, Overall, Other Presentation Matters (noncontrolling interest and attribution)
- Deloitte DART, Roadmap: Noncontrolling Interests (dart.deloitte.com/USDART/home/codification/broad-transactions/asc810-10/roadmap-noncontrolling-interests)
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error