Minority Interest (Non-Controlling Interest)

On the balance sheet, minority interest sits in the equity section (or between liabilities and equity under older standards) and represents the outside owners' claim on the subsidiary's net assets. On the income statement, the parent consolidates 100% of the subsidiary's revenue and expenses, then deducts 'net income attributable to non-controlling interest' near the bottom to show earnings belonging to the parent's shareholders. This is why you will see two net income lines: consolidated net income and net income attributable to the parent.

Enterprise Value = Equity Value + Net Debt + Minority Interest + Preferred Stock. Minority interest is added because the parent consolidates 100% of the subsidiary's EBITDA in its financials. If you use that full EBITDA in an EV/EBITDA multiple, you must also include the minority owners' claim on that EBITDA in the enterprise value. Failing to add minority interest would understate EV relative to the EBITDA being used, distorting valuation multiples.

When ownership exceeds 50%, the parent has control and must fully consolidate. Between 20% and 50%, the equity method is used — only the parent's share of net income appears as a single line item. Below 20%, the investment is carried at fair value. The distinction matters enormously: consolidation inflates revenue and EBITDA by including 100% of the subsidiary, while the equity method keeps the subsidiary off the parent's top line entirely.