Sun Life 2010 Annual Report Download - page 86

Notes to the Consolidated Financial Statements
(Amounts in millions of Canadian dollars except for per share amounts and where otherwise stated)
1. Accounting policies
Description of business
Sun Life Financial Inc. (“SLF Inc.”) is a publicly traded company and is the holding company of Sun Life Assurance Company of
Canada (“Sun Life Assurance”) and Sun Life Global Investments Inc. Both SLF Inc. and Sun Life Assurance are incorporated under the
Insurance Companies Act of Canada, and are regulated by the Office of the Superintendent of Financial Institutions, Canada (“OSFI”).
SLF Inc. and its subsidiaries are collectively referred to as “us”, ”our”, “ours”, “we” or “the Company”. We are an internationally
diversified financial services organization providing savings, retirement and pension products, and life and health insurance to
individuals and groups through our operations in Canada, the United States, the United Kingdom and Asia. We also operate mutual
fund and investment management businesses, primarily in Canada, the United States and Asia.
Basis of presentation
We prepare our Consolidated Financial Statements in accordance with Canadian generally accepted accounting principles (“GAAP”),
as issued by the Accounting Standards Board (“AcSB”) of the Canadian Institute of Chartered Accountants (“CICA”).
The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions
that affect:
• the reported amounts of assets and liabilities at the date of the financial statements,
• the disclosure of contingent assets and liabilities at the date of the financial statements, and
• the reported amounts of revenues, policy benefits and expenses during the reporting period.
Actual results could differ from those estimates.
A summary of differences between Canadian and U.S. GAAP is provided in Note 26.
The significant accounting policies used in the preparation of our Consolidated Financial Statements are summarized below.
Basis of consolidation
Our Consolidated Financial Statements reflect the assets and liabilities and results of operations of all subsidiaries and variable interest
entities (“VIE”) in which we are the primary beneficiary after intercompany balances and transactions have been eliminated. The
purchase method is used to account for the acquisition of subsidiaries with the difference between the acquisition cost of a subsidiary
and the fair value of the subsidiary’s net identifiable assets acquired recorded as Goodwill. The equity method is used to account for
other entities over which we are able to exercise significant influence. Investments in these other entities are reported in Policy loans
and other invested assets in our Consolidated Balance Sheets with our share of earnings reported in Other net investment income
(loss) in our Consolidated Statements of Operations and our share of other comprehensive income (“OCI”) in our Consolidated
Statements of Comprehensive Income. The proportionate consolidation method is used to account for our interest in investments over
which we exercise joint control, resulting in the consolidation of our proportionate share of assets, liabilities, income and expenses in
our Consolidated Financial Statements.
Bonds – held-for-trading and available-for-sale
Bonds are designated as held-for-trading or available-for-sale and are carried at fair value. Generally, bonds supporting our actuarial
liabilities are designated as held-for-trading. Changes in fair value of held-for-trading bonds are recorded to Change in fair value of
held-for-trading assets in our Consolidated Statements of Operations. Because the value of actuarial liabilities is determined by
reference to the assets supporting those liabilities, changes in the actuarial liabilities offset a significant portion of the change in fair
value of the assets, except for changes in the fair value of the assets that are due to other-than-temporary impairment. Bonds not
supporting our actuarial liabilities are generally designated as available-for-sale. Changes in fair value of available-for-sale bonds are
recorded to unrealized gains and (losses) in OCI.
Purchases and sales of bonds are recognized or derecognized in our Consolidated Balance Sheets on their trade dates, which are the
dates that we commit to purchase or sell the bond. Transaction costs for bonds classified as held-for-trading are recorded to Change in
fair value of held-for-trading assets, while transaction costs for bonds classified as available-for-sale are capitalized on initial
recognition and are recognized in income using the effective interest method.
Realized gains and losses on the sale of available-for-sale bonds are reclassified from accumulated OCI and recorded to Net gains
(losses) on available-for-sale assets in our Consolidated Statements of Operations. Since held-for-trading bonds are measured at fair
value, realized gains and losses are included with unrealized gains and losses in Change in fair value of held-for-trading assets in our
Consolidated Statements of Operations. Interest income earned on both held-for-trading and available-for-sale bonds is recorded as
Other net investment income (loss) in our Consolidated Statements of Operations.
82 Sun Life Financial Inc. Annual Report 2010 Notes to the Consolidated Financial Statements