(Increase in Minority Interest (v2780.01))
If the company you are analyzing (Company A) owns more than 50% but less than 100% of another company (Company B), it typically consolidates the financial statements of the two entities. To recognize that a portion of the combined company's income and assets do not belong to the shareholders of Company A, Minority Interest accounts appear on both the Income Statement (v1720), as a deduction, and on the Balance Sheet (v2780.00), as an equity account. This account should be entered as an after-tax amount.
Assume Company A owns 60% of Company B, and Company A produces consolidated financial statements combining the two companies. All of Company B's earnings ($20 million) and equity ($100 million) are included in Company A's Income Statement and Balance Sheet. But because Company B's other shareholders own 40% of the earnings and equity contributed by Company B, Minority Interest (v1720, v2780.00) must be recorded as follows:
Minority Interest (v1720):
40% * $20 million = $8 million
Minority Interest (v2780.00):
40% * $100 million = $40 million