Sun Life 2012 Annual Report Download - page 99

Non-Current Assets and Disposal Groups Classified as Held for Sale and
Discontinued Operations
Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered principally through a
sale transaction rather than through continuing use. This condition is satisfied when a sale is highly probable and the assets are
available for immediate sale in their present condition, subject only to terms that are usual and customary for sales of non-current
assets and disposal groups. For a sale to be highly probable, management must be committed to sell the non-current asset or disposal
group within one year from the date of classification as held for sale.
Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value
less costs to sell. Individual assets and assets in a disposal group not subject to these measurement requirements include financial
assets, investment properties, insurance and reinsurance assets, deferred tax assets and assets arising from employee benefits.
These exempt assets are measured in accordance with the relevant accounting policies described for those assets included in this
note before the disposal group as a whole is measured to the lower of its carrying amount and fair value less cost to sell. Any
impairment loss for the disposal group is recognized as a reduction to the carrying amount of the non-current assets in the disposal
group that are in scope of the measurement requirements.
A disposal group is presented as a discontinued operation if all of the following conditions are met: i) it is a component of the Company
for which operations and cash flows can be clearly distinguished operationally and financially from the rest of the Company, ii) it
represents a separate major line of business or geographical area of operations that either has been disposed of or is classified as held
for sale; or it is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations.
Assets in a disposal group classified as held for sale are presented separately in our Consolidated Statements of Financial Position.
Discontinued operations are presented separately from continuing operations in our Consolidated Statements of Operations.
Insurance Contract Liabilities
Insurance contracts are contracts under which we accept significant insurance risk from a policyholder by agreeing to compensate the
policyholder if a specified uncertain future event adversely affects the policyholder. The presence of significant insurance risk in
individual contracts is assessed by reviewing books of contracts with homogeneous risk features.
As discussed in the Segregated Funds section of this Note, certain insurance contracts under which the policyholder bears the risks
associated with the underlying investments are classified as Insurance contracts for account of segregated fund holders in our
Consolidated Statements of Financial Position.
Insurance contract liabilities, including policy benefits payable and provisions for policyholder dividends, are determined in accordance
with Canadian accepted actuarial practice and any requirements of OSFI. As confirmed by guidance provided by the Canadian Institute
of Actuaries (“CIA”), the current Canadian Asset Liability Method (“CALM”) of valuation of insurance contract liabilities satisfies the
IFRS 4 Insurance Contracts requirements for eligibility for use under IFRS. Under CALM, liabilities are set equal to the statement of
financial position value of the assets required to support them.
Some insurance contracts contain discretionary participation features (“DPF”), whereby the policyholder has the right to receive
potentially significant additional benefits based on the actual investments and other experience on a block of similar contracts. IFRS
allows the non-guaranteed, or participating, elements of such contracts to be classified as either a liability or as equity, depending on
the nature of our obligation to the policyholder. The contracts issued by us contain constructive obligations to the policyholder with
respect to the DPF of the contracts. We have therefore elected to classify these features as a liability, consistent with accounting
treatment under CALM, and in accordance with guidance provided by the CIA.
Derivatives embedded in insurance contracts are treated as separate derivatives and measured at fair value with changes in fair value
recognized in income, except when the embedded derivative itself meets the definition of an insurance contract under IFRS, or when
the risks and characteristics are closely related to those of the host contracts or when the derivative is the policyholder’s option to
surrender an insurance contract for a fixed amount or an amount based on a fixed amount and an interest rate. The derivatives that
have not been separated are accounted for as insurance contract liabilities.
Financial Liabilities
Investment Contract Liabilities
Contracts issued by us that do not transfer significant insurance risk, but do transfer financial risk from the policyholder to us, are
financial liabilities and are accounted for as investment contracts. Service components of investment contracts are treated as service
contracts. For further details on how service components of investment contracts are treated, see the Service Contracts accounting
policy in this Note.
Liabilities for investment contracts without DPF are measured at FVTPL or amortized cost. Contracts recorded at FVTPL are measured
at fair value at inception and each subsequent reporting period. Contracts recorded at amortized cost are initially recognized at fair
value, less transaction costs directly attributable to the issue of the contract. These liabilities are derecognized when the obligation of
the contract is discharged, cancelled or expired. At each subsequent period, the contracts are measured at amortized cost using the
effective interest method. Changes in fair value of investment contract liabilities recorded at FVTPL and amortization on contracts
recorded at amortized cost are recorded as an Increase (decrease) in investment contract liabilities in our Consolidated Statements of
Operations. Deposits collected from and payments made to contract holders are recorded as an Increase and decrease in investment
contract liabilities in our Consolidated Statements of Financial Position.
As discussed in the Segregated Funds section of this Note, certain investment contracts under which the policyholder bears the risks
associated with the underlying investments are classified as Investment contracts for account of segregated fund holders in the
Consolidated Statements of Financial Position. The accounting for Investment contracts that contain DPF is described in the Insurance
Contract Liabilities section of this Note.
Notes to Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2012 97