Non-Controlling Interests explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Part III is a new addition brought in under the Act, and most of it says one thing: consolidate as you would a standalone, then show who owns each part of the result.
Two sets of definitions
The Act defines a "subsidiary company" and an "associate company" differently from the definition of a "subsidiary", an "associate" and a "joint venture" under Ind AS.
Rule 4A of the Companies (Accounts) Rules, 2014, inserted on 4 September 2015, states that financial statements shall be in the form specified in Schedule III to the Act and comply with Accounting Standards or Indian Accounting Standards as applicable, provided that the items contained in financial statements shall be prepared in accordance with the definitions and other requirements specified in those standards.
The resolution: Ind AS definitions of subsidiary, associate and joint venture shall be considered for assessment of control, joint control and significant influence, even though the requirement of preparation of CFS will be governed by the Act. Companies are expected to prepare the Standalone Financial Statements in addition to Consolidated Financial Statements.
Mutatis mutandis
Where the company must prepare a consolidated balance sheet, consolidated statement of changes in equity and consolidated statement of profit and loss, the company shall mutatis mutandis follow the requirements of this Schedule as applicable to a company in preparation of the Standalone Financial Statements — meaning all the reporting requirements of Schedule III need to be aggregated and reported for the group as a whole.
The four additional requirements
- Allocation of results. Profit or loss attributable to "non-controlling interest" and to "owners of the parent" shall be presented as allocation for the period in the statement of profit and loss. Total comprehensive income for the period attributable to each shall also be presented as allocation for the period, and the total comprehensive income disclosures shall also be made in the statement of changes in equity. In addition to the disclosure requirements in the Indian Accounting Standards, the aforesaid disclosures shall also be made in respect of "other comprehensive income" — in line with para 81B of Ind AS 1.
- Balance sheet presentation. Non-controlling interests in the Balance Sheet and in the Statement of Changes in Equity, within equity, shall be presented separately from the equity of the owners of the parent.
- Investments accounted for using the equity method.
- Changes in proportion held by non-controlling interests under Ind AS 110 para B96.
Under Ind AS 110 para B96, when the proportion of equity held by non-controlling interests changes, the entity adjusts the carrying amounts of the controlling and non-controlling interests to reflect the changes in their relative interests in the subsidiary.
Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent — it never passes through profit or loss, because control has not changed hands.
Presentation: an entity may present such gain or loss separately as "Non-controlling Interest Reserve" shown under "Other Reserves" by specifying the nature.
The practical consequence of all four requirements is stated plainly in the Guidance Note — they indicate the need to obtain such information for all the subsidiaries and associates for preparing the Consolidated Financial Statements, including where such subsidiaries or associates are not audited under the Act.
Common mistakes
- Allocating profit or loss but not total comprehensive income.
- Omitting the allocation disclosures for other comprehensive income.
- Routing a change in the minority stake through profit or loss.
- Presenting non-controlling interests outside equity.