Exercise 20.6 ★ ★ LESS THAN MAJORITY OWNERSHIP On 1 March 2015, Pink Ltd acquired 40% of the voting shares of Scarlet Ltd. Under the company’s constitution, each share is entitled to one vote. On the basis of past experience, only 65% of the eligible votes are typically cast at the annual general meetings of Scarlet Ltd. No other shareholder holds a major block of shares in Scarlet Ltd. The fi nancial year of Scarlet Ltd ends on 31 December each year. The directors of Pink Ltd argue that they are not required under IFRS 10 to include Scarlet Ltd as a subsidiary in Pink Ltd’s consolidated fi nancial statements at 31 December 2015 as there is no conclusive evidence that Pink Ltd can control the fi nancial and operating policies of Scarlet Ltd. The auditors of Pink Ltd disagree, referring specifi cally to past years’ voting fi gures. Required Provide a report to Pink Ltd on whether it should regard Scarlet Ltd as a subsidiary in its preparation of consolidated fi nancial statements at 31 December 2015.