Sun Life 2010 Annual Report Download - page 135

26.C Changes in U.S. generally accepted accounting standards
Adopted in 2010
The significant new U.S. GAAP accounting pronouncements and their impact to our Consolidated Financial Statements are described
in the section that follows.
In June 2009, the FASB issued ASU 2009-16, Accounting for Transfers of Financial Assets, which amends ASC Topic 860, Transfers
and Servicing. It amends the sale accounting criteria for transfers of financial assets, changes the initial recognition of retained
interests, provides a definition of a participating interest to establish when transfers of portions of financial assets can achieve sale
accounting, and eliminates the concept of a QSPE. As a result, QSPEs are subject to the consolidation guidance in ASC Topic 810:
Consolidations. This guidance is effective for financial asset transfers occurring on or after January 1, 2010. The adoption of these
amendments did not have a material impact in our Consolidated Financial Statements.
In June 2009, the FASB issued Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which
amends ASC Topic 810, Consolidations. We adopted these amendments on January 1, 2010. This guidance amends the consolidated
requirements applicable to VIEs. Under this new guidance, an entity would consolidate a VIE when the entity has both (a) the power to
direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses of
the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be
significant to the VIE. In February 2010, the FASB issued ASU 2010-10, Amendments for Certain Investment Funds, which defers the
amended consolidation guidance from being applied for a reporting entity’s interest in an entity (1) that has all the attributes of an
investment company or (2) for which it is industry practice to apply measurement principles for financial reporting purposes that are
consistent with those followed by investment companies. As a result of the amended consolidation guidance, in addition to the VIE we
consolidated under the previous guidance, we consolidated two Company sponsored Collateralized Debt Obligations (“CDO”) and one
synthetic CDO, electing the fair value option, four Company sponsored Collateralized Loan Obligations (“CLO”), at the carrying values
carried forward as if we had been the primary beneficiary from the date we entered into the VIE arrangements and the SL Capital
Trusts that issued the innovative capital instruments. The impact in our Consolidated Balance Sheet on January 1, 2010, as a result of
consolidating the CDO, the synthetic CDO and the CLO VIEs was an increase in assets of $926, an increase in liabilities of $891, and
increases in retained earnings of $21 and accumulated OCI of $14. The increases in retained earnings and accumulated OCI,
respectively, are related to the unrealized net losses on held-for-trading and available-for-sale debt securities issued by the various
VIEs which are eliminated and effectively remeasured at amortized cost through consolidation. We elected the fair value option for the
CDOs and synthetic CDO to reduce the accounting mismatch that would result from measuring consolidated debt security assets and
financial liabilities at fair value and amortized cost, respectively. We elected the fair value option for debt securities with a fair value of
$305 and a fair value adjustment of $(3) and financial liabilities with an amortized cost of $426 and fair value adjustment of $(51) as at
January 1, 2010. We did not elect the fair value option for the CLOs because the consolidated loan assets and financial liabilities are
both measured at amortized cost. The consolidation of the SL Capital Trusts did not have a material impact in our Consolidated
Financial Statements. Section D xvi of this note includes additional disclosures related to these VIEs.
In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements, which provides amendments
to ASC Topic 820, Fair Value Measurements and Disclosures. The new disclosures required include disclosure of the amounts of
significant transfers between Levels 1 and 2 and the reasons for those transfers, the reasons for any transfers in or out of level 3 and
information about purchases, sales, issuances and settlements for the reconciliation of Level 3 measurements. It also clarifies the
disclosure requirements regarding the level of disaggregation and valuation techniques. The amended disclosures, with the exception
of the information regarding purchases, sales, issuances and settlements in the Level 3 reconciliation, are required to be included in
the 2010 Consolidated Financial Statements. We have included the required disclosure in Note 5 since Canadian GAAP required this
disclosure in 2009.
In March 2010, the FASB issued ASU 2010-11, Scope Exception Related to Embedded Credit Derivatives, an amendment to
Topic 815, Derivatives and Hedging. It addresses the application of the embedded derivative scope exception, which only applies to
the transfer of credit risk in the form of subordination of one financial instrument to another. The new standard also clarifies how to
analyze embedded credit derivative features, including those in CDOs, credit-linked notes (“CLNs”), synthetic CDOs and CLNs and
other synthetic securities and whether they require to be accounted for separately. The standard permits a one-time election of the fair
value option to the entire hybrid instrument at the adoption of this standard. We adopted the new standard on July 1, 2010 and elected
the fair value option to measure our investment in securities issued by the synthetic CDOs at fair value, with changes in fair value
recognized in earnings. Our investments in scope of the new standard are $89 of securities issued by synthetic CDOs. Upon adoption
of the new standard we reclassified from accumulated other comprehensive income to retained earnings of an after-tax gross loss of
$21. There was no gross gain.
In July 2010, the FASB issued ASU 2010-20, Disclosure about the Credit Quality of Financing Receivables and the Allowance for
Credit Losses, which amends ASC Topic 310, Receivables. The amendments require that an entity provide a greater level of
disaggregated information about the credit quality of the entity’s financing receivables and allowance for credit losses to provide
financial statement users with greater transparency about these items. It also requires disclosure of credit quality indicators and the
aging of past due information for its financing receivables. The adoption of this standard did not have a material impact to our
Consolidated Financial Statements.
Notes to the Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2010 131