What are non-controlling interests?

Non-controlling interests, also known as minority interests, represent the portion of equity in a subsidiary that is not owned by the parent company. When a parent company has control over a subsidiary—usually through owning more than 50% of its voting stock—it consolidates the financial statements of that subsidiary into its own. However, if there are other shareholders who own shares in that subsidiary, their stake is accounted for as non-controlling interests.

This concept is essential for financial reporting because it ensures that the financial statements reflect the ownership structure accurately. Non-controlling interests appear in the equity section of the consolidated balance sheet, indicating the share of the subsidiary’s equity attributable to shareholders other than the parent company. Hence, the correct choice emphasizes the specific equity portion that belongs to other owners, highlighting the role of the parent company as a controlling entity while recognizing the rights of other minority shareholders.