Sun Life 2012 Annual Report Download - page 94

Notes to the Consolidated Financial Statements
(Amounts in millions of Canadian dollars except for per share amounts and where otherwise stated)
1. Significant Accounting Policies
Description of Business
Sun Life Financial Inc. (“SLF Inc.”) is a publicly traded company domiciled in Canada and is the holding company of Sun Life
Assurance Company of Canada (“Sun Life Assurance”). Both companies 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”, “the Enterprise” 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.
Statement of Compliance
We prepared our Consolidated Financial Statements in accordance with International Financial Reporting Standards (“IFRS”) as issued
and adopted by the International Accounting Standards Board (“IASB”). Our accounting policies have been applied consistently within
our Consolidated Financial Statements.
Basis of Presentation
Our Consolidated Statements of Financial Position are presented in the order of liquidity and each statement of financial position line
item includes both current and non-current balances, as applicable.
We have defined our reportable segments and the amounts disclosed for those segments based on our management structure and the
manner in which our internal financial reporting is conducted. Transactions between segments are executed and priced on an arm’s-
length basis in a manner similar to transactions with third parties.
The significant accounting policies used in the preparation of our Consolidated Financial Statements are summarized below and are
applied consistently by us.
Critical Estimates, Judgments and Provisions
The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the application of
policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from those estimates. Areas of
significant accounting estimates and judgments include the measurement and classification of insurance contract liabilities and
investment contract liabilities, determination of fair value of financial instruments, impairment of financial instruments, impairment of
goodwill and intangible assets, whether the substance of our relationship with a special purpose entity (“SPE”), subsidiary, joint venture
or associate constitutes control, joint control or significant influence and determination of provisions and liabilities for pension plans,
other post-retirement benefits, and taxes. We also use judgment when determining functional currencies, contingencies, restructuring,
non-current assets and disposal groups classified as held for sale and discontinued operations and the determination of fair value of
share-based payments. Details on the estimates and judgments are further described in the relevant accounting policies in these
Notes.
Other than insurance contract liabilities and investment contract liabilities, provisions are recognized for present legal or constructive
obligations as a result of a past event, if it is probable that they will result in an outflow of economic resources and the amount can be
reliably estimated. The amounts recognized for these provisions are the best estimates of the expenditures required to settle the
present obligations or to transfer them to a third party at the statement of financial position date, considering all the inherent risks and
uncertainties, as well as the time value of money. These provisions are reviewed as relevant facts and circumstances change. The
unwinding of the effect of discounting is recorded in our Consolidated Statements of Operations as interest expense. Provisions
included in insurance contract liabilities and investment contract liabilities are determined in accordance with Canadian accepted
actuarial practice.
Consolidation, Joint Ventures and Investments in Associates
Our Consolidated Financial Statements include the results of operations and the financial position of entities controlled by SLF Inc. or
its subsidiaries, including SPEs, after intercompany balances and transactions have been eliminated. Control is defined as the power to
govern the financial and operating policies of an entity so as to obtain benefits from its activities. Entities are fully consolidated from the
date control is obtained by SLF Inc. or one of its subsidiaries, and deconsolidated on the date control ceases. The acquisition method
is used to account for the acquisition of a subsidiary at the date that control is obtained, with the difference between the acquisition cost
of the subsidiary and the fair value of the subsidiary’s net identifiable assets acquired recorded as goodwill. Equity interests held by
external parties are shown as non-controlling interests and transactions with non-controlling interest holders are recorded in our
Consolidated Statements of Changes in Equity.
The equity method is used to account for joint ventures and entities over which SLF Inc. or its subsidiaries are able to exercise
significant influence. Joint control is the contractually agreed sharing of control and exists only when the strategic and operating
decisions require the unanimous consent of the parties sharing control. Significant influence is the power to participate in the financial
and operating policies of an investee but is not control or joint control over those policies. Significant influence is generally presumed to
exist when SLF Inc. or its subsidiaries holds greater than 20 % but less than 50 % of the voting power of the investee unless it can be
demonstrated that this is not the case.
92 Sun Life Financial Inc. Annual Report 2012 Notes to Consolidated Financial Statements