In accounting , minority interest (or non-controlling interest ) is the portion of a subsidiary corporation's stock that is not owned by the parent corporation. The magnitude of the minority interest in the subsidiary company is generally less than 50% of outstanding shares , or the corporation would generally cease to be a subsidiary of the parent.
18-1059: NCI can stand for: Non-controlling interest ( Minority interest ), in accounting, minority ownership in a subsidiary corporation National Cancer Institute , American medical research agency National Captioning Institute , American non-profit organization providing captioning for film and TV National Computational Infrastructure National Facility (Australia) , Australia’s national research computing service National College of Ireland , college in Dublin, Ireland Native Communications , Inc., Aboriginal public broadcasting service in Manitoba, Canada National Coastwatch Institution , UK voluntary coastwatch organisation North Coast Institute of TAFE , university system in New South Wales, Australia Negative chemical ionization , chemical technique used in mass spectrometry Noarlunga Centre railway station ,
36-428: A controlling interest requiring consolidation to be achieved without exceeding 50% ownership, depending on the accounting standards being employed. Minority interest belongs to other investors and is reported on the consolidated balance sheet of the owning company to reflect the claim on assets belonging to other, non-controlling shareholders. Also, minority interest is reported on the consolidated income statement as
54-478: A railway station in Adelaide, Australia nCi, abbreviation for nano curie , a unit of radioactivity Noi con l'Italia (" Us with Italy "), an Italian political party Nuclear Cities Initiative Topics referred to by the same term [REDACTED] This disambiguation page lists articles associated with the title NCI . If an internal link led you here, you may wish to change the link to point directly to
72-555: A share of profit belonging to minority shareholders. The reporting of 'minority interest' is a consequence of the requirement by accounting standards to 'fully' consolidate partly owned subsidiaries. Full consolidation, as opposed to partial consolidation, results in financial statements that are constructed as if the parent corporation fully owns these partly owned subsidiaries; except for two line items that reflect partial ownership of subsidiaries: net income to common shareholders and common equity. The two minority interest line items are
90-458: A simplified aggregation of company's financial situation. One unit of additional debt may not be of same importance as additional one unit of missing cash. It can be demonstrated that enterprise value depends on the probability of default (the rating) and works as a "negative growth rate" in the future. Unlike market capitalization, where both the market price and the outstanding number of shares in issue are readily available and easy to find, it
108-400: Is an economic measure reflecting the market value of a business (i.e. as distinct from market price ). It is a sum of claims by all claimants: creditors (secured and unsecured) and shareholders (preferred and common). Enterprise value is one of the fundamental metrics used in business valuation , financial analysis , accounting , portfolio analysis, and risk analysis . Enterprise value
126-441: Is more comprehensive than market capitalization , which only reflects common equity . Importantly, EV reflects the opportunistic nature of business and may change substantially over time because of both external and internal conditions. Therefore, financial analysts often use a comfortable range of EV in their calculations. For detailed information on the valuation process see Valuation (finance) . A simplified way to understand
144-509: Is shown at the very bottom of the Equity section on the consolidated balance sheet and subsequently on the statement of changes in equity . Under US GAAP minority interest can be reported either in the liabilities section, the equity section or, preceding changes to acceptable accounting standards, the mezzanine section of the balance sheet. The mezzanine section is located between liabilities and equity. FASB FAS 160 and FAS 141r significantly alter
162-486: Is that they cannot be sure what part of the reported cash position is owned by a 100% subsidiary and what part is owned by a 51% subsidiary. Minority interest is an integral part of the enterprise value of a company. The converse concept is an associate company . Under the International Financial Reporting Standards , the non-controlling interest is reported in accordance with IFRS 5 and
180-428: Is virtually impossible to calculate an EV without making a number of adjustments to published data, including often subjective estimations of value: In practice, EV calculations rely on reasonable estimates of the market value of these components. For example, in many professional valuations: When using valuation multiples such as EV/EBITDA and EV/EBIT, the numerator should correspond to the denominator. In other words,
198-563: The EV concept is to envision purchasing an entire business. If you settle with all the security holders, you pay EV. Counterintuitively, increases or decreases in enterprise value do not necessarily correspond to "value creation" or "value destruction". Any acquisition of assets (whether paid for in cash or through share issues) will increase EV, whether or not those assets are productive. Similarly, reductions in capital intensity (for example by reducing working capital) will reduce EV. EV can be negative if
SECTION 10
#1732855725584216-412: The company, for example, holds abnormally high amounts of cash that are not reflected in the market value of the stock and total capitalization. All the components are relevant in liquidation analysis, since using absolute priority in bankruptcy all securities senior to the equity have par claims. Generally, also, debt is less liquid than equity, so the "market price" may be significantly different from
234-441: The firm in question. Value of associate companies is subtracted because it reflects the claim on assets consolidated into other firms. EV should also include such special components as unfunded pension liabilities, employee stock options , environmental provisions, abandonment provisions, and so on since they also reflect claims on the company. There are certain limitations and traps in using enterprise value. One of which can be
252-401: The intended article. Retrieved from " https://en.wikipedia.org/w/index.php?title=NCI&oldid=1104186095 " Category : Disambiguation pages Hidden categories: Short description is different from Wikidata All article disambiguation pages All disambiguation pages Minority interest It is, however, possible (such as through special voting rights) for
270-446: The net difference between what would have been the common equity and net income to common, if all subsidiaries were fully owned, and the actual ownership of the group. All the other line items in the financial statements assume a fictitious 100% ownership. Some investors have expressed concern that the minority interest line items cause significant uncertainty for the assessment of value, leverage and liquidity. A key concern of investors
288-406: The price at which an entire debt issue could be purchased. In valuing equities, this approach is more conservative than using the "market price". Cash is subtracted because it reduces the net cost to a potential purchaser. The effect applies whether the cash is used to issue dividends or to pay down debt. Value of minority interest is added because it reflects the claim on assets consolidated into
306-537: The profitability metric in the denominator should be available to all stakeholders represented in the numerator. The EV should, therefore, correspond to the market value of the assets that were used to generate the profits in question, excluding assets acquired (and including assets disposed) during a different financial reporting period. This requires restating EV for any mergers and acquisitions (whether paid in cash or equity), significant capital investments or significant changes in working capital occurring after or during
324-557: The way a parent company accounts for non-controlling interest (NCI) in a subsidiary. It is no longer acceptable to report minority interest in the mezzanine section of the balance sheet. From 2013 onwards, the UK Government stated that it would become a minority equity co-investor in future Private Finance Initiative projects, which thereafter were referred to as "PF2 projects". Enterprise value Enterprise value ( EV ), total enterprise value ( TEV ), or firm value ( FV )
#583416