There is a noncontrolling interest when ________.
A)a company uses the equity method to account for ownership of another company
B)a company owns less than 50% of another company but exercises significant control
C)a company controls another company but owns less than 100% of that other company
D)a company is owned by others outside the company

Question

Quizplus · Accepted Answer

Noncontrolling interest refers to the portion of a subsidiary company that is not owned by the parent company. This situation occurs when a company controls another company but owns less than 100% of that other company. For example, if Company A owns 80% of Company B, the remaining 20% is considered noncontrolling interest. Option A is incorrect because the equity method is used to account for an ownership interest between 20% and 50%. Option B is incorrect because if a company exercises significant control, it would be classified as a controlling interest, not a noncontrolling interest. Option D is incorrect because it refers to a company that is owned by others outside the company, which is not relevant to noncontrolling interest.

There Is a Noncontrolling Interest When ________