Sun Life 2015 Annual Report Download - page 100

Foreign Currency Translation
Translation of Transactions in Foreign Currencies
The financial results of SLF Inc. and its subsidiaries, joint ventures and associates are prepared in the currency in which they conduct
their ordinary course of business, which is referred to as functional currency. Transactions occurring in currencies other than the
functional currency are translated to the functional currency using the spot exchange rates at the dates of the transactions.
Monetary assets and liabilities in foreign currencies are translated to the functional currency at the exchange rate at the statement of
financial position date. Non-monetary assets and liabilities in foreign currencies that are held at fair value are translated using the
exchange rate at the statement of financial position date, while non-monetary assets and liabilities that are measured at historical cost
are translated using the exchange rate at the date of the transaction.
The resulting exchange differences from the translation of monetary items and non-monetary items held at fair value, with changes in
fair value recorded to income, are recognized in our Consolidated Statements of Operations. For monetary assets classified as
available-for-sale (“AFS”), translation differences calculated on amortized cost are recognized in our Consolidated Statements of
Operations and other changes in carrying amount are recognized in other comprehensive income (“OCI”). The exchange differences
from the translation of non-monetary items classified as AFS are recognized in OCI.
Translations to the Presentation Currency
In preparing our Consolidated Financial Statements, the financial statements of foreign operations are translated from their respective
functional currencies to Canadian dollars, our presentation currency. Assets and liabilities are translated at the closing exchange rate
at the statement of financial position date, and income and expenses are translated using the average exchange rates. The
accumulated gains or losses arising from translation of functional currencies to the presentation currency, net of the effect of any
hedges, are included as a separate component of OCI within equity. Upon disposal of a foreign operation that includes loss of control,
significant influence or joint control, the cumulative exchange gain or loss related to that foreign operation is recognized in income.
Invested Assets
Financial Assets Excluding Derivative Financial Instruments
Financial assets include cash, cash equivalents and short-term securities, debt securities, equity securities, mortgages and loans,
financial assets included in other invested assets and policy loans. Financial assets are designated as financial assets at fair value
through profit or loss (“FVTPL”) or AFS assets, or are classified as loans and receivables at initial recognition. The following table
summarizes the financial assets included in our Consolidated Statements of Financial Position and the asset classifications applicable
to these assets:
Consolidated Statements of Financial Position line Asset classification
Cash, cash equivalents and short-term securities FVTPL
Debt securities FVTPL and AFS
Equity securities FVTPL and AFS
Mortgages and loans Loans and receivables
Other invested assets FVTPL and AFS
Policy loans Loans and receivables
Mortgages and loans include mortgages, loans and debt securities not quoted in an active market. Financial assets included in Other
invested assets include investments in limited partnerships, segregated funds and mutual funds. Cash equivalents are highly liquid
instruments with a term to maturity of three months or less, while short-term securities have a term to maturity exceeding three months
but less than one year. Policy loans are fully secured by the policy values on which the loans are made. The accounting for each asset
classification is described in the following sections.
i) Initial Recognition and Subsequent Measurement
Generally, debt securities, equity securities and other invested assets supporting our insurance contract liabilities or investment
contract liabilities measured at fair value are designated as FVTPL, while debt securities, equity securities and other invested assets
not supporting our insurance contract liabilities or that are supporting investment contract liabilities measured at amortized cost are
designated as AFS. Mortgages and loans and policy loans are classified as loans and receivables. Financial assets are recognized in
the Consolidated Statements of Financial Position on their trade dates, which are the dates that we commit to purchase or sell the
assets. Originated mortgages and loans are recognized in the Consolidated Statements of Financial Position on their funding dates.
Financial Assets at Fair Value Through Profit or Loss
Financial assets at FVTPL include financial assets that are held for trading (“HFT”), as well as financial assets that have been
designated as FVTPL at initial recognition. A financial asset is classified as HFT if it is acquired principally for the purpose of selling in
the near term. A financial asset can be designated as FVTPL if it eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different
bases; or if a group of financial assets, financial liabilities or both, is managed and its performance is evaluated on a fair value basis.
Cash equivalents and short-term securities have been classified as HFT.
Debt securities, equity securities and other invested assets supporting insurance contract liabilities or investment contract liabilities
measured at fair value have been designated as FVTPL. This designation has been made to eliminate or significantly reduce the
measurement inconsistency that would arise due to the measurement of the insurance contract or investment contract liabilities, which
are based on the carrying value of the assets supporting those liabilities. Because the carrying value of insurance contract liabilities is
determined by reference to the assets supporting those liabilities, changes in the insurance contract liabilities generally offset changes
in the fair value of debt securities classified as FVTPL, except for changes that are due to impairment. The majority of equity securities
and other invested assets classified as FVTPL are held to support products where investment returns are passed through to
policyholders and therefore, changes in the fair value of those assets are significantly offset by changes in insurance contract liabilities.
98 Sun Life Financial Inc. Annual Report 2015 Notes to Consolidated Financial Statements