When you are reading through a company s financial statements, there will be a line at the end of the income statement and balance sheet called minority interest or non-controlling interest . Both terms mean essentially the same thing, but what exactly is minority interest and why does it matter?
Minority interests are basically the portion of the equity chef jobs of all the various subsidiaries that the holding company does not own. It is the slice of the pie that is not owned by the shareholders of the holding company.
If we look at a summarized version of CapitaLand Ltd s (SGX: C31) latest balance sheet below, S$4.3b out of S$20.2b of Total Equity belongs to Non-controlling interests. chef jobs That means third parties own about 20% of all the equity that CapitaLand s investors have invested in. As an example, if you re an investor in one of CapitaLand s subsidiaries, like CapitaMalls Asia Ltd (SGX: JS8) for instance, you will be considered a minority interest to a shareholder of CapitaLand. Balance Sheet 30 Sep 2013 Non-current Assets S$23.3b Current Assets S$15.8b Current Liabilities S$4.9b Non-current chef jobs Liabilities S$14.0b Equity Attributable to owners of the Company S$15.9b Non-controlling interests S$4.3b Total Equity S$20.2b (S$20.2b = S$15.9b + S$4.3b)
To illustrate, Hong Leong Asia (SGX: H22) consolidates the accounts of its 20%owned subsidiary, China Yuchai. When analyzing Hong Leong s latest balance sheet for the three months ended 30 Sep 2013, we will see that out of S$2.1b in total equity, S$1.3b actually belongs to minority interests.
However, when we are analyzing Hong Leong s cash flow statements, the numbers that are presented does not differentiate between what actually belongs to the company s shareholders and what belongs to minority interests. Therefore, if you re looking at Hong Long as an investment, you have to be able to make a judgment on how the numbers should be adjusted to better reflect the portion of the cash flow that belongs chef jobs to shareholders of the company.
Most of the time, minority interests will not be a factor in our analysis of a company. But when it does, we should be aware of it and make the necessary adjustments to the company s numbers. If not, it could end up being a painful lesson for us.
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When you are reading through a company’s financial chef jobs statements, there will be a line at the end of the income statement and balance sheet called “minority interest” or “non-controlling interest”. Both terms mean essentially the same thing, but what exactly is minority interest and why does it matter? What is it? Minority interests are basically the portion of the equity of all the various subsidiaries that the holding company does not own. It is the slice of the pie that is not owned by the shareholders of the holding company. If we…
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