Explain the Concept of a Non- Controlling Interest

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The Answer is The portion of the equity of a subsidiary not owned by a parent is known as the non- controlling interest and is defined in AASB 127 para.4 as "the equity in a subsidiary not attributable,directly or indirectly,to a parent".That is,the non- controlling interest in a subsidiary is the group of shareholders who own shares that the parent company does not own.If a parent company owns 90% of the shares in a subsidiary,then the non- controlling interest owns the remaining 10%.Where P Ltd owns less than 100% of the share capital in S Ltd (say,80%),there exists a direct non- controlling interest.In this situation,only the percentage of shares owned by P Ltd is eliminated against the equity acquired,even though 100% of S Ltd's assets and liabilities is consolidated with the assets and liabilities of P Ltd.An imbalance would be created if the direct NCI were not shown.That is,the 20% direct NCI must be accounted for in the consolidation accounts or they will not balance.This concept is based on the notion of control of S Ltd by P Ltd and conforms with the entity concept of consolidation adopted by AASB 127.

Explain the Concept of a Non- Controlling Interest

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