Minority Interests in Group Accounts
It was mentioned earlier that the total assets and liabilities of subsidiary companies are included in the consolidated balance sheet, even in the case of subsidiaries which are only partly owned. A proportion of the net assets of such subsidiaries in fact belong to investors from outside the group.
Financial reporting standards (FRS) defines minority interest in a subsidiary undertaking as the “Interest in a subsidiary undertaking included in the consolidation that is attributable to the shares held by or on behalf of persons other than the parent undertaking and its subsidiary undertakings”.
In the consolidated balance sheet it is necessary to distinguish this proportion from those assets attributable to the group and financed by shareholders’ funds.
The net assets of a company are financed by share capital and reserves. The consolidation procedure for dealing with partly owned subsidiaries is to calculate the proportion of ordinary shares, preference shares and reserves attributable to minority interests.