AyushiCurious In: 1. Financial Accounting > Consolidation What is minority interest? What is minority interest? Share Facebook You must login to add an answer. Username or email* Password* Captcha* Remember Me! Forgot Password? Need An Account, Sign Up Here 1 Answer Voted Recent AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS) 2022-06-14T17:53:18+00:00Added an answer on June 14, 2022 at 5:53 pm Introduction Minority interest refers to the interest of the outsiders in the subsidiary or subsidiaries of a holding company. In the presentation of the consolidated balance sheet of a parent company and its subsidiaries, Minority Interest is shown just below Shareholders’ Funds. Explanation To understand the concept of minority interest, we need to first understand the relationship between a holding company and its subsidiary company or companies. A holding company means a company that controls one or more companies by: Holding more than fifty percent of the total voting rights or equity share capital. having the power to appoint or remove the majority of the board members. A subsidiary company is a company that is controlled by another company. From the above, we can simply deduce that a holding company holds the majority of the equity in its subsidiary company or companies. So, the equity of the subsidiary company which does not belong to the holding company, but to the outsiders is known as the minority interest as it is, in fact, the minority in comparison to the majority stake of the holding company. Example For example, A Ltd holds 75% of the equity in B Ltd, then the rest 25% which belongs to the outsiders will be the Minority Interest. Minority Interest means the share of outsiders in the: Paid-up share capital of the subsidiary Reserve and Surplus For example, B Ltd has the following particulars under Shareholders’ Funds. Equity Share Capital Rs. 10,00,000 Revaluation Reserve Rs. 4,00,000 Balance of Profit and Loss A/c Rs. 1,00,000 General Reserves Rs. 5,00,000 B Ltd is a subsidiary company of the A Ltd. A Ltd holds 75% of B Ltd. It means minority interest in B Ltd is 25% (100% – 75%) Therefore, in the consolidated balance sheet of A Ltd and its subsidiary, the minority interest will be as follows: Minority Interest in B Ltd (25%) Equity Share Capital Rs. 2,50,000 (10,00,000 x 25%) Revaluation Reserve Rs. 1,00,000 (4,00,000 x 25%) Balance of Profit and Loss A/c Rs. 25,000 (1,00,000 x 25%) General Reserves Rs. 1,25,000 (5,00,000 x 25%) Total Rs. 5,00,000 0 Share Share Share on Facebook Share on Twitter Share on LinkedIn Share on WhatsApp Related Questions Accounting terms What do you mean by goodwill ? What do you mean by LLP ? What are kind or classes of shares issued by companies in accounting ? Which type of accounting is done by NPOs ? How to locate errors in trial balance? what does a trial balance include?