Noncontrolling interest (NCI)


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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?

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

Thanks.
 
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Triest123

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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.
 

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