Sun Life 2012 Annual Report Download - page 134

The carrying amounts of goodwill allocated to our CGUs are as follows:
As at December 31, 2012 2011
SLF Canada
Individual insurance $ 906 $ 906
Individual wealth 160 158
Group retirement services 453 453
Group benefits 1,054 1,054
SLF U.S.
Variable annuities ––
Employee benefits group 333 342
SLF Asia
Hong Kong 437 448
Corporate
MFS Holdings 393 409
U.K. 175 172
Total $ 3,911 $ 3,942
Goodwill acquired in business combinations is allocated to the CGUs or groups of CGUs that are expected to benefit from the
synergies of the particular acquisition. Goodwill is assessed for impairment annually or more frequently if events or circumstances
occur that may result in the recoverable amount of a CGU falling below its carrying value. The recoverable amount is the higher of fair
value less cost to sell and value in use. We use fair value less cost to sell as the recoverable amount
We use the best evidence of fair value less cost to sell as the price obtainable for the sale of a CGU, or group of CGUs. Fair value less
cost to sell is initially assessed by looking at recently completed market comparable transactions. In the absence of such comparables,
we use either an appraisal methodology (with market assumptions commonly used in the valuation of insurance companies), earnings
multiples or factors based on assets under management.
The appraisal methodology is based on best estimates of future income, expenses, level and cost of capital over the lifetime of the
policies and, where appropriate, adjusted for items such as transaction costs. The value ascribed to new business is based on sales
anticipated in our business plans, sales projections for the valuation period based on reasonable growth assumptions, and anticipated
levels of profitability of that new business. In calculating the value of new business, future sales are projected for 5 to 15 years. In some
instances, market multiples are used to approximate the explicit projection of new business.
The discount rates applied reflect the nature of the environment for that CGU. The discount rates used range from 10% to 12% (after
tax). More established CGUs with a stronger brand and competitive market position use discount rates at the low end of the range and
CGUs with a weaker competitive position use discount rates at the high end of the range. The capital levels used are aligned with our
business objectives.
Judgment is used in estimating the recoverable amounts of CGUs and the use of different assumptions and estimates could result in
material adjustments to the valuation of CGUs and the size of any impairment. Any material change in the key assumptions including
those for capital, discount rates, the value of new business, and expenses as well as cash flow projections used in the determination of
recoverable amounts may result in impairment charges, which could be material. CGUs with higher risk of impairment are Individual
Wealth and Individual Insurance in SLF Canada due to the relatively small, if any, excess of fair value over carrying value.
132 Sun Life Financial Inc. Annual Report 2012 Notes to Consolidated Financial Statements