Sun Life 2012 Annual Report Download - page 84

As at December 31, 2012, our finite-life intangible assets had a carrying value of $634 million, which reflected the value of the field
force and asset administration contracts acquired as part of the Clarica, CMG Asia, and Genworth EBG acquisitions, as well as
software costs. Our indefinite-life intangible assets had a carrying value of $228 million as at December 31, 2012. The value of the
indefinite-life intangible assets reflected fund management contracts.
Income Taxes
Income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to
the taxation authorities. Deferred income tax is provided using the liability method. Our provision for income taxes is calculated based
on the tax rates and tax laws that have been enacted or substantially enacted by the end of the reporting period. The determination of
the required provision for current and deferred income taxes requires that we interpret tax legislation in the jurisdictions in which we
operate and that we make assumptions about the expected timing of realization of deferred income tax assets and liabilities. To the
extent that our interpretations differ from those of tax authorities or the timing of realization is not as expected, the provision for income
taxes may increase or decrease in future periods to reflect actual experience. The amount of any increase or decrease cannot be
reasonably estimated.
Deferred income tax assets are recognized for all deductible temporary differences, carry forward of unused tax losses and unused tax
credits to the extent that it is probable that taxable profit will be available against which the temporary differences, unused tax losses
and unused tax credits can be utilized. At each reporting period, we assess all available evidence, both positive and negative, to
determine the amount of deferred income tax assets to be recorded. If it is probable that the benefit of tax losses and tax deductions
will not be realized, a deferred income tax asset is not recognized. The assessment requires significant estimates and judgment about
future events based on the information available at the reporting date.
From time to time, local governments in countries in which we operate enact changes to statutory corporate income tax rates. These
changes require us to review and re-measure our deferred tax assets and liabilities as of the date of enactment. As of December 31,
2012, our net deferred tax asset in the Consolidated Statements of Financial Position was $1.0 billion, primarily in the U.S. and
Canada. Any future tax rate reductions in jurisdictions where we carry a net deferred tax asset, could result in a reduction in the
carrying value of the deferred tax asset and a corresponding income tax expense at the time of substantial enactment of a rate
reduction.
Pension Plans and Other Post-Retirement Benefits
The Company offers defined benefit pension plans and defined contribution plans for eligible employees. Since January 1, 2009, all
new employees in Canada participate in a defined contribution plan, while existing employees continue to accrue future benefits in the
prior defined benefit plan. In general, all of our material defined benefit plans worldwide are closed to new entrants and defined
contribution plans are provided to new hires. Our defined benefit pension plans offer benefits based on length of service and final
average earnings and certain plans offer some indexation of benefits. In addition, in some countries we provide certain post-retirement
medical, dental and life insurance benefits to eligible qualifying employees and their dependents upon meeting certain requirements.
Due to the long-term nature of these plans, the calculation of benefit expenses and accrued benefit obligations depends on various
assumptions, including discount rates, rates of compensation increases, medical cost rates, retirement ages, mortality rates and
termination rates. Based upon consultation with external pension actuaries, management determines the assumptions used for these
plans on an annual basis. The discount rate assumption used is based on the market yields, as at December 31, of corporate AA
bonds that match the expected timing of benefit payments. The expected return on assets assumption for pension cost purposes is the
weighted average of expected long-term asset return assumptions by asset class, and is selected from a range of possible future asset
returns. Heath care cost calculations are based on long-term trend assumptions which may differ from actual results.
Actual experience may differ from the assumed rates, which would impact the pension benefit expenses and accrued benefit
obligations in future years. Details of our pension and post-retirement benefit plans and the key assumptions used for these plans are
included in Note 27 to our 2012 Consolidated Financial Statements.
Changes in Accounting Policies
Amended International Financial Reporting Standards Adopted in 2012
The following amendments to existing standards were issued by the IASB and adopted by us in the current year.
In October 2010, IFRS 7 Financial Instruments: Disclosures (“IFRS 7”) was amended to revise the disclosures related to transfers of
financial assets. The revised disclosures will help users of financial statements evaluate the risk exposures relating to transfers of
financial assets and the effect of those risks on an entity’s financial position and provide transparency in the reporting of these
transactions, particularly those that involve securitization of financial assets. The adoption of these amendments did not have a
material impact on our Consolidated Financial Statements.
In December 2010, IAS 12 Income Taxes was amended regarding deferred tax and the recovery of underlying assets. The
amendments provide an approach for measuring deferred tax liabilities and deferred tax assets when investment properties are
measured at fair value. These amendments were effective on January 1, 2012. The adoption of these amendments did not have a
material impact on our Consolidated Financial Statements as these amendments are consistent with our current accounting policy.
Amended and New International Financial Reporting Standards to be Adopted in 2013
The following new standards and amendments to existing standards were issued by the IASB and are expected to be adopted by us in
2013.
In May 2011, IFRS 10 Consolidated Financial Statements (“IFRS 10”) was issued, which replaces the consolidation guidance in IAS 27
Consolidated and Separate Financial Statements (“IAS 27”) and SIC-12 Consolidation-Special Purpose Entities. It defines the principle of
control, establishes control as the basis for determining which entities are consolidated, and sets out the requirements for the preparation of
82 Sun Life Financial Inc. Annual Report 2012 Management’s Discussion and Analysis