Are there instances when a company would report minority interest when they only own 10-15% of another company? Are there situations where a company could make the case for having significant control with only a 10-15% share of the company? I believe minority interest can only recognized under consolidation method in the US, am I mistaken?
From the parents stand point, a minority interest is the equity not owned in a subsidiary, but owned by minority investors. So if a parent owns only a 10-15% stake in another company, there is no consolidation, so the stake just appears as a financial asset on the balance sheet.
“So if a parent owns only a 10-15% stake in another company, there is no consolidation, so the stake just appears as a financial asset on the balance sheet.” that’s only true if the investment isn’t considered a variable interest entity. a vie is such to where a company with only a small equity stake (as measured by voting rights, i think) is the primary beneficiary or has the primary liability should things go south. the classic example (actually the reason the guidance, fin 46, was written in the first place) is enron. they had all of these off-the-books special purpose entities out there where they would hide massive liabilities. under the rules at the time, the technically didn’t have to consiolidate, but they would now b/c of fin 46.
“Are there instances when a company would report minority interest when they only own 10-15% of another company?” there are lots of instances where you would consolidate under FIN 46 while only “owning” 10-15% of another company. in its simplest terms, it’s about who absorbs expected losses and not about who has voting rights. the enron example referenced above refers to a situation where they gave the 1% GP all voting rights and thus the GP (fastow) consolidated whereas the Company “owned” 99% yet had no voting rights and thus did not consolidate. this is not the case after FIN 46.