A minority investment or a minority interest refers to the non-controlling share in a company held by an investor or another company. For example, a private equity firm may have a non-controlling share in a company. The minority investment is usually less than 50% of the total outstanding shares of the company.

A minority interest can also be seen as a non-current liability on a parent company’s balance sheet that represents the portion of its subsidiary that is not owned by the parent but is owned by minority shareholders. As an example, if a subsidiary is 90% owned by the parent, and 10% owned by other shareholders, then this 10% will be shown as liability on the balance sheet.

The minority investment can be either minority passive interest or minority active interest. Passive means that the company does not have material influence on the company in which it has this minority interest. Active means that the company is in a position to influence the company in which it has minority interest.

For accounting purposes, in case of a minority passive investment, only the dividend received from the minority interest is recorded. For active investments, both dividends received and a percentage of income is recorded in the company’s accounts.

Under IFRS, the minority investments are reported under the equity section of the consolidated balance sheet. Under US GAAP, there is flexibility to report minority interest under liabilities, equity, or under mezzanine section.