Home Assignment Palau Ltd has acquired, during the current year, the following investments in the shares issued by the following two companies: - Orchid Ltd $120 000 (40% of issued capital) - Bluebell Ltd $117 000 (35% of issued capital) Palau Ltd is unsure how to account for these investments and has asked you, as the auditor, for professional advice. Specifically, Palau Ltd wonders whether it needs to prepare consolidated financial statements under IFRS10. To help you, the company has provided the following information about the two investee companies: Orchid Ltd: 1. The remaining shares in Orchid Ltd are owned by a diverse group of investors who each hold a small parcel of shares. 2. Historically, only a small number of the shareholders attend the general meetings or question the actions of the directors. 3. Palau 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 five members. Bluebell Ltd: 1. The remaining shares in Bluebell Ltd are owned by a small group of investors who each own approximately 15% of the issued shares. One of these shareholders is Orchid Ltd, who owns 17%. 2. The shareholders take a keen interest in the running of the company and attend all meetings. 3. Two of the shareholders, including Orchid Ltd, already have representatives on the board of directors who have indicated their intention of nominating for re-election. Required: 1. Advise Palau Ltd as to whether, under IFRS 10, it controls Orchid Ltd and/or Bluebell Ltd. Support your conclusion with discussion using IFRS 10. 2. Would your conclusion be different if the remaining shares in Orchid Ltd were owned by three institutional investors each holding 20%? If so, why?