Sun Life 2015 Annual Report Download - page 103

Other Assets
Other assets which are measured at amortized cost, include accounts receivable and investment income due and accrued. Deferred
acquisition costs arising from service contracts or from service components of investment contracts are amortized over the expected
life of the contracts based on the future expected fees.
Reinsurance Assets
In the normal course of business, we use reinsurance to limit exposure to large losses. We have a retention policy that requires that
such arrangements be placed with well-established, highly-rated reinsurers. Reinsurance assets are measured consistently with the
amounts associated with the underlying insurance contracts and in accordance with the terms of each reinsurance contract. Amounts
due to or from reinsurers with respect to premiums received or paid claims are included in Other assets and Other liabilities in the
Consolidated Statements of Financial Position. Premiums for reinsurance ceded are presented as premiums ceded in the Consolidated
Statements of Operations. Reinsurance expenses (recoveries), as presented in our Consolidated Statements of Operations, represent
reinsurance expenses and expense recoveries resulting from reinsurance agreements.
Reinsurance assets are subject to impairment testing. If impaired, the carrying value is reduced, and an impairment loss is recognized
in Reinsurance expenses (recoveries) in our Consolidated Statements of Operations. Impairment occurs when objective evidence
exists (as a result of an event) after the initial recognition of the reinsurance asset indicating that not all amounts due under the terms
of the contract will be received, and the impairment can be reliably measured.
Reinsurance assumed is accounted for as an insurance, investment or service contract depending on the underlying nature of the
agreement and if it meets the definition of an insurance, investment or service contract. For the accounting for these types of contracts,
see the respective policy section in this Note.
Property and Equipment
Owner-occupied properties and all other items classified as property and equipment are carried at historical cost less accumulated
depreciation and impairment.
Costs including the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for
its intended use are capitalized. Repairs and maintenance costs incurred subsequent to acquisition or development of the property are
charged through operating expenses during the period in which they are incurred. Other costs incurred subsequently are included in
the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits
associated with the asset will flow to us and the cost of the asset can be measured reliably.
Depreciation of property and equipment, excluding land which is not depreciated, is calculated using a straight-line method and the
asset is amortized to its residual value over its estimated useful life as follows:
Owner-occupied properties 25 to 49 years
Furniture, computers, other office equipment, and leasehold improvements 2 to 10 years
The asset’s residual value, useful life, and method of depreciation are reviewed regularly, at a minimum at the end of each fiscal year,
and adjusted if appropriate. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is considered to
be impaired and it is written down immediately to its recoverable amount. In the event of an improvement in the estimated recoverable
amount, the related impairment may be reversed. Gain and loss on disposal of property and equipment is determined by reference to
its carrying amount and is recognized in the Consolidated Statements of Operations.
Intangible Assets
Intangible assets consist of finite life and indefinite life intangible assets. Finite life intangible assets are amortized on a straight-line
basis over varying periods of up to 40 years, and are charged through operating expenses. The useful lives of finite life intangible
assets are reviewed annually, and the amortization is adjusted as necessary. Indefinite life intangibles are not amortized, and are
assessed for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired.
Impairment is assessed by comparing the carrying values of the indefinite life intangible assets to their recoverable amounts. If the
carrying values of the indefinite life intangibles exceed their recoverable amounts, these assets are considered impaired, and a charge
for impairment is recognized in our Consolidated Statements of Operations. The recoverable amount of intangible assets is determined
using various valuation models, which require management to make certain judgments and assumptions that could affect the estimates
of the recoverable amount.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable tangible and intangible assets of
the acquired businesses. It is carried at original cost less any impairment subsequently incurred. Goodwill is assessed for impairment
annually or more frequently if events or circumstances occur that may result in the recoverable amount of a cash generating unit
(“CGU”) falling below its carrying value. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely
independent of cash inflows from other groups of assets. We exercise significant judgment in determining our CGUs. The factors
considered in determining our CGUs include product cash inflows, product distribution, target markets, and how management monitors
and evaluates the operations.
The goodwill balances are allocated to either individual or groups of CGUs that are expected to benefit from the synergies of the
business combination. Goodwill impairment is quantified by comparing a CGU’s carrying value to its recoverable amount, which is the
higher of fair value less costs to sell and value in use. Impairment losses are recognized immediately and may not be reversed in future
periods. Significant judgment is involved in estimating the model inputs used to determine the recoverable amount of our CGUs,
including those for discount rates, capital, the value of new business, and expenses as well as cash flow projections, due to the
uncertainty in the timing of and amount of cash flows and the forward-looking nature of these inputs. The assumptions may differ from
the actual experience, and estimates may change from period to period based on future events or revisions of assumptions. These key
assumptions are discussed in Note 10.
Notes to Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2015 101