Exercise 20.3 ★ ★ CONTROL Pluto Ltd has acquired, during the current year, the following investments: Sun Ltd Saturn Ltd €120 000 (40% of issued capital) €117 000 (35% of issued capital) Pluto Ltd is unsure how to account for these investments and has asked you, as the auditor, for some professional advice. Specifi cally, Pluto Ltd is concerned that it may need to prepare consolidated fi nancial statements under IFRS 10. To help you, the company has provided the following information about the two investee companies: Sun Ltd • The remaining shares in Sun Ltd are owned by a diverse group of investors who each hold a small parcel of shares. • Historically, only a small number of the shareholders attend the general meetings or question the actions of the directors. • Pluto Ltd has nominated three new directors and expects that they will be appointed at the next annual general meeting. The current board of directors has fi ve members. Saturn Ltd • The remaining shares in Saturn Ltd are owned by a small group of investors who each own approximately 15% of the issued shares. One of these shareholders is Sun Ltd, which owns 17%. • The shareholders take a keen interest in the running of the company and attend all meetings. • Two of the shareholders, including Sun Ltd, already have representatives on the board of directors who have indicated their intention of nominating for re-election. Required 1. Advise Pluto Ltd as to whether, under IFRS 10, it controls Sun Ltd and/or Saturn Ltd. Support your conclusion. 2. Would your conclusion be different if the remaining shares in Sun Ltd were owned by three institutional investors each holding 20%? If so, why?