The investment banking interview question we’re going to go over today is “What is non-controlling interest and why do companies have it?” Non-Controlling Interest is not a very intuitive concept, and so a lot of candidates get this question wrong. Here’s what you can say for your answer.
“Non-Controlling Interest is the value of the stake in a company’s subsidiary that the company controls but doesn’t own. It’s a line item on the Balance Sheet under the Shareholder’s Equity section.
Under US GAAP, companies have to include 100% of the financials of all subsidiaries that they control. But occasionally, companies control subsidiaries that they don’t own 100% of. And so to reflect the fact that there’s value belonging to other parties, companies record Non-Controlling Interest.”
To sum up, that’s an example of how you can answer the question: “What is non-controlling interest and why do companies have it”. A common mistake we see candidates make is that they often use the term Minority Interest and Non-Controlling Interest interchangeably. However, the two are not synonymous. The correct term is Non-Controlling Interest, not Minority Interest.