What are non-controlling interests?

Non-controlling interests represent the portion of equity in a subsidiary that is not attributable to the parent company. When a parent company owns less than 100% of a subsidiary, the remaining equity ownership belongs to other shareholders, and this is accounted for as non-controlling interests on the consolidated financial statements.

In complex group structures, it’s crucial to distinguish between the parent company’s interest and the interests of other shareholders. Non-controlling interests reflect the rights and claims of these other shareholders in the subsidiary's net assets and profits. This distinction is significant for accurate financial reporting and understanding the overall equity structure of the consolidated entity.

The other choices do not accurately capture the definition of non-controlling interests. The equity attributable to the parent company pertains solely to the ownership of the parent, while owners of controlling shares are not relevant to this specific term. Similarly, investors providing loans represent a debt relationship rather than equity ownership, further distancing them from the concept of non-controlling interests. Understanding this terminology is essential for interpreting consolidated financial statements correctly and assessing the financial health of corporate groups.