Parents Ltd has acquired, during the current year, the following investments:

Son Ltd	130 000 (35%of issued capital)
Daughter Ltd	115000 (40%of issued capital)

Parents Ltd is unsure how to account for these investments and has asked you, as the auditor, for some professional advice. Specifically, ParentsLtd is concerned that it may need to prepare consolidated financial statements under IFRS 10. To help you, the company has provided the following information about the two investee companies:

Son Ltd- The remaining shares in Son 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. ParentsLtd 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.

Daughter Ltd-The remaining shares in DaughterLtd are owned by a small group of investors who each own approximately 15% of the issued shares. One of these shareholders is Son 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 Son Ltd, alreadyhave representatives on the board of directors who have indicated their intention of nominating for re-election.

Required:

1. Advise Parents Ltd how to account for its investment in Son Ltd and Daughter Ltd by referring to IFRS 10.

2. Would your conclusion be different if the remaining shares in Son Ltd were owned by three institutional investors each holding 20%? If so, why? Explain.