Sun Life 2010 Annual Report Download - page 134

Cdn. GAAP U.S. GAAP
Premium revenue,
fee income,
maturities and
surrenders, and
interest on claims
and deposits
Premiums for universal life and other investment-
type contracts are recorded as revenue, and a
liability for future policy benefits is established as a
charge to income.
Interest accrued on contracts is shown as an
increase in actuarial liabilities.
Payments to contract holders upon maturity are
reflected as an expense with an offsetting reduction
to the increase in actuarial liabilities.
Amounts received for universal life and investment-
type contracts are not included in the income
statement but are reported as deposits to contract
holder account balances. Revenues from these
contracts are limited to amounts assessed against
policyholders’ account balances for mortality, policy
administration and surrender charges, and are
included in Fee income when earned.
Interest accrued on contracts is included in interest
on claims and deposits.
Payments upon maturity or surrender are reflected
as reductions to the contract holder deposits on the
balance sheet.
Other payments in excess of the account value,
such as death claims, are reflected as an expense.
Unrealized foreign
currency
translation gains
(losses)
A proportionate amount of the exchange gain or loss
accumulated in OCI is reflected in net income when
there is a reduction in our net investment in a
foreign operation resulting from a capital
transaction, dilution, or sale of all or part of the
foreign operation.
A proportionate amount of exchange gains or losses
accumulated in OCI is reflected in net income only
when there is a reduction in our net investment in
the foreign operation resulting from the sale of all or
substantially all of the foreign operation.
Future income tax
asset and liability(1)
Future income tax liabilities and assets are
recognized based on the differences between the
accounting values of assets and liabilities and their
related tax bases using income tax rates of enacted
or substantively enacted tax law.
Future income tax liabilities and assets are recorded
based on income tax rates of currently enacted tax
law. Differences in the provisions for income taxes
arise from differing accounting policies for assets
and liabilities, and differences in the recognition of
tax rate changes are disclosed in this note. As well,
this note provides other disclosure differences.
Derivatives For net investment hedges, changes in fair value of
these hedging derivatives, along with interest
earned and paid on the swaps are recorded to the
foreign exchange gains and losses in OCI, offsetting
the respective exchange gains or losses arising
from the underlying investments.
There is no requirement to bifurcate embedded
derivatives from actuarial liabilities for insurance
contracts. As a result, they are included as part of
actuarial liabilities.
For net investment hedges, spot rate changes on
the hedging derivatives are recorded to the foreign
exchange gains and losses in OCI to offset the
respective exchange gains or losses arising from
the underlying investments. The remainder of the
changes in fair value, along with interest earned and
paid, is recorded in net income.
Embedded derivatives in insurance contracts are
separately accounted for as stand-alone derivatives
when they are not clearly and closely related to their
host instruments. They are recorded at fair value
with changes in fair value recorded in income.
Non-cash collateral Non-cash collateral received in securities lending
transactions is not recognized on our Consolidated
Financial Statements.
If we have the ability to sell or repledge non-cash
collateral received in securities lending transactions,
we recognize an asset on the balance sheet and a
corresponding liability for the obligation to return it.
Non-controlling
interests
Non-controlling interests is presented outside of
liabilities and equity. Transactions with non-
controlling interests are accounted for as step-
acquisitions or disposals.
Non-controlling interests is included as part of
equity, separate from shareholders’ equity. Effective
in 2009, transactions with non-controlling interests
that do not result in a change in control are
accounted for as equity transactions rather than
step-acquisitions or disposals.
Business
combinations
Transaction and other costs directly related to an
acquisition are capitalized as part of the purchase.
As a result of the adoption of the amended section
on business combinations in ASC Topic 805 in 2009
(originally issued as FAS 141(R), transaction costs
related to an acquisition are recognized as an
expense through income.
Consolidation of
VIE
VIEs for which we are the primary beneficiary are
consolidated. The primary beneficiary is the variable
interest holder that absorbs the majority of the
expected losses, expected residual returns, or both.
Qualifying Special Purpose Entities (“QSPE’s”) are
exempt from consolidation by the transferor.
Prior to 2010, the consolidation requirements for
VIEs were the same as under Canadian GAAP. As
the result of the amendments to ASC Topic 810
adopted on January 1, 2010, the primary beneficiary
is the variable interest holder that has both the
power to direct the activities that most significantly
impact the VIE’s economic performance and the
obligation to absorb losses, or the right to receive
benefits, that could potentially be significant to the
VIE. QSPEs are no longer exempt from the
consolidation guidance.
(1) U.S. GAAP terminology is deferred income tax.
130 Sun Life Financial Inc. Annual Report 2010 Notes to the Consolidated Financial Statements