Noncontrolling interest (NCI)

[kyyfan]

Greeting All,

I don't have any accounting background. I'm just started to explore in this field.
This two days, I've spent some time to understand the income statement and the balance sheet from one of the company. I notice that both statement also mention about the term which is call "Noncontrolling interest"

www macabacus.com/accounting/noncontrolling-interest

The first clarification I would like to seek for:
In the income statement, I can see that profit attributable includes both owner of the parents and the Non-controlling Interests.

My question is, if I buy 1000 this company share from stock market, will I considered as the non-controlling interest? If the answer is NO. then who is this non-controlling interests and what is the different between me (holding 1000 shares) and this non-controlling interests entity?

The second clarification I would like to seek for:
In the balance sheet, I can see that the Non-controlling Interests is put under the equity category.

My question is, if this Non-controlling Interests is belong to other minority share holder, and why it still put under the equity category? I am thinking if this amount of money will eventually pay out to this minority share holder?


I know my question might be look silly to you guys. But I am really no idea for this.

Thanks.

 

[Triest123]

Greeting All,



Thanks.

My question is, if I buy 1000 this company share from stock market, will I considered as the non-controlling interest? If the answer is NO. then who is this non-controlling interests and what is the different between me (holding 1000 shares) and this non-controlling interests entity?

=> The first thing you should know is that you are reading a consolidated balance sheet which is prepared by the Holding company (say H Co), which hold a subsidary company (say S Co.) with less than 100% but more than 51% shares of this company (i.e. S Co.)

In other words, the Non-controlling interest represents the shares of S Ltd are not hold by the Holding Company (H Ltd).

If you buy 1,000 shares of H Ltd from the Stock market, you are just the shareholder of the holding company.


The second clarification I would like to seek for:
In the balance sheet, I can see that the Non-controlling Interests is put under the equity category.

My question is, if this Non-controlling Interests is belong to other minority share holder, and why it still put under the equity category? I am thinking if this amount of money will eventually pay out to this minority share holder?

=> When preparing the consolidated fiancial statements, the whole profit, assets and liabilties of the S Ltd shall be added to the H Ltd's book respectively. Since H Ltd only hold (say 80%) shares of S Ltd (i.e. share 80% net asset value of S Ltd), the remaining 20% net asset value of S Ltd (i.e. the non-contolling interest) shall be added to the H Ltd's shareholder equity in order to match with the whole assets and liabilities of S Ltd already grouped into the H Ltd's book.