How is minority interest accounted for when calculating net income

Question

Reading around, I found that minority interest is defined as interest in a company controlled by a company other than the parent company.

Does that mean that anytime a company A becomes a shareholder of company B, those shares becomes part of minority interest? Does that include mutual funds as well? What's the point of this?

When I look at an income statement, I see that "net income" is equal to "net income to company" minus "minority interest in earnings". Looking at the cashflow statements, I see that the net income represented there is the net income to company minus minority interest in earnings. Where does the latter go? Surely, the minority owners don't get a share of the income.

Answer 1

When I look at an income statement, I see that "net income" is equal to "net income to company" minus "minority interest in earnings". Looking at the cashflow statements, I see that the net income represented there is the net income to company minus minority interest in earnings. Where does the latter go?

The rest goes into another line. See, this line "net income" allows you to evaluate the income OF THE COMPANY - if a company has a TON of interest earnings (hugh cash reserves, investments in other companies that pay a dividend) then unless you remove those (and keep them in another line item) they can turn a loosing company into a profitable one on paper. This is nice, but why keep the business around then ;) This is why they are removed - so to be able to evaluate the business of the company operations, without being overshadowed or influenced by investment income.

Answer 2

If A owns 90% of B's voting shares, it controls B. The remaining 10% is the minority interest. Minority interest does not apply if A owns 100% of B.