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.