Question

The noncontrolling interest represents an outside ownership in a subsidiary that is not attributable to the parent company. Where in the consolidated balance sheet is this outside ownership interest recognized?

a. In the liability section.
b. In a mezzanine section between liabilities and owners' equity.
c. In the owners' equity section.
d. The noncontrolling interest is not recognized in the consolidated balance sheet.

Answer 1

Noncontrolling interest is recognized in the owners' equity section of the consolidated balance sheet, reflecting the equity stake of external investors in the subsidiary that the parent company does not own.

Step-by-step explanation:

The noncontrolling interest, also known as minority interest, represents the share of a subsidiary owned by outside investors that is not owned by the parent company within a consolidated financial statement. According to the accounting standards, noncontrolling interest should be recognized in the owners' equity section of the consolidated balance sheet. This treatment highlights the fact that noncontrolling interest is an equity interest in the subsidiary and should not be mistaken for a liability of the parent company. Instead, it represents the equity stake in the part of the subsidiary not owned by the parent but is required to be reported in the parent's consolidated balance sheet.