5.1 Introduction

Noncontrolling interests represent the portion of a less than wholly owned subsidiary’s equity that is attributable to an owner other than the parent. Noncontrolling interests are typically recognized for the first time upon the occurrence of either of the following:

• The initial consolidation of a subsidiary not wholly owned by the parent (see Section 5.2).
• The parent’s sale of shares in a wholly owned subsidiary over which the parent retains control after the sale (see Section 5.3).

In each case, the requirement to initially recognize noncontrolling interests is linked to a preceding conclusion that the subsidiary is appropriately consolidated under ASC 810-10. Interests held in nonconsolidated legal entities do not represent noncontrolling interests and are instead governed by other U.S. GAAP. The path to reaching a consolidation conclusion is discussed in Deloitte’s Roadmap Consolidation — Identifying a Controlling Financial Interest.

The initial measurement of noncontrolling interests is principally a balance sheet matter. Subsequent changes in the percentage of a subsidiary’s equity interests held by noncontrolling interest holders typically result from transactions between owners (e.g., the sale of an ownership interest to [by] a noncontrolling interest holder by [to] the reporting entity).

The remainder of this chapter is limited to addressing the amount at which noncontrolling interests are measured upon initial recognition. The accounting for subsequent changes in the percentage of a subsidiary’s equity interests held by noncontrolling interest holders (typically arising from incremental sales, acquisitions, issuances, or redemptions of subsidiary shares) is addressed in Chapter 7.