In financial statements, what does non-controlling interest represent?

Non-controlling interest represents the ownership interests in a subsidiary that are not owned by the parent company. This concept arises when a parent company has a controlling interest in a subsidiary (typically more than 50% of the voting shares) but does not own 100% of the subsidiary. The non-controlling interest accounts for the portion of equity in the subsidiary that belongs to other shareholders.

Including non-controlling interest in the consolidated financial statements is important because it provides a complete picture of the financial positioning and performance of the entire corporate group. It reflects the rights of those shareholders outside of the parent company and is shown in the equity section of the balance sheet.

For clarity and context, ownership interests in assets directly owned by the parent (which would be referred to directly here) does not encompass the portion owned by external shareholders in a subsidiary, nor do debt obligations or stock held specifically by the parent company relate to this concept.