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 financial 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$$sconsolidated financial statements at $31$ December $2015$ as there is no conclusive evidence that Pink Ltd can control the financial and operating policies of Scarlet Ltd$.$ The auditors of Pink Ltd disagree, referring specifically to past years$$ voting figures.

Provide a report to Pink Ltd on whether it should regard Scarlet Ltd as a subsidiary in its preparation of consolidated financial statements at $31$ December $2015.$