Minority Interest (Equity)

Minority interest in equity represents the portion of subsidiaries that is owned by outside shareholders. It shows how much of the group's net assets do not belong to the parent company's shareholders.

How minority interest arises:

• Partial acquisitions: Parent acquires more than 50% but less than 100% of a subsidiary
• IPO of subsidiary: Parent sells minority stake in a subsidiary
• Joint ventures: Consolidated entities with outside owners

Balance sheet treatment:

• Consolidation: Parent includes 100% of subsidiary assets and liabilities
• Equity allocation: Minority interest shows the portion belonging to outside owners
• Separate line item: Reported within equity but distinct from parent shareholders' equity

Why it matters:

• True ownership: Shows equity actually belonging to parent company shareholders
• Complex structures: Significant minority interests indicate subsidiaries with outside owners
• Future considerations: Parent may buy out minorities or sell down stakes
• Valuation impact: Minority interests must be considered in enterprise value calculations

Analysis approach:

• Track changes: Growing minority interest may indicate partial sales or subsidiary growth
• Profitability: Compare minority interest growth to subsidiary profit allocation
• Enterprise value: Add minority interest to market cap when calculating EV