Sun Life 2015 Annual Report Download - page 88

2015, our net deferred tax asset in the Consolidated Statements of Financial Position was $967 million, 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 sponsors defined benefit pension plans and defined contribution plans for eligible employees. All of our material defined
benefit plans worldwide are closed to new entrants with new hires participating in defined contribution plans. Our defined benefit
pension plans offer benefits based on length of service and final average earnings and certain plans offer some indexation of benefits.
We maintain certain supplementary non-contributory defined benefit pension arrangements for eligible employees, which are primarily
for benefits which are in excess of local tax limits. In addition to these plans, in some countries the Company sponsors certain post-
retirement benefit plans (for medical, dental and/or life insurance benefits) for eligible qualifying employees and their dependents who
meet certain requirements.
In Canada, since January 1, 2009, all new employees participate in a defined contribution plan, while existing employees continue to
accrue future benefits in the prior plan which provides a defined benefit plan and an optional contributory defined contribution plan.
With the closure of the Canadian defined benefit plans to new entrants, the volatility associated with future service accruals for active
members has been limited and will decline over time. As at December 31, 2015, there are no active members in the U.K. and no active
employees accruing future service benefits in the U.S. defined benefit plans.
The major risks remaining in relation to past service obligations are increases in liabilities due to a decline in discount rates, greater life
expectancy than assumed and adverse asset returns. We continue to implement our plan to de-risk our material defined benefit
pension plans Company-wide by systematically shifting the pension asset mix towards liability matching investments over the next few
years. The target for our significant plans is to minimize volatility in funded status arising from changes in discount rates and exposure
to equity markets.
Due to the long-term nature of these defined benefit plans, the calculation of benefit expenses and accrued benefit obligations depends
on various assumptions, including discount rates, rates of compensation increases, health care cost trend 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 used is based on market yields of high-quality corporate
bonds that are denominated in the same currency in which the benefits will be paid, and that have terms to maturity approximating the
terms of the related obligation.
Actual experience may differ from that assumed, which would impact the valuation of defined benefit plans and the level of benefit
expenses recognized in future years. Details of our pension and post-retirement benefit plans and the key assumptions used for the
valuation these plans are included in Note 26 of our 2015 Annual Consolidated Financial Statements.
Changes in Accounting Policies
We have included in this section a summary of changes in accounting policies. Where there are references to Notes, these are part of
our 2015 Annual Consolidated Financial Statements.
New and Amended International Financial Reporting Standards Adopted in 2015
We have adopted a narrow-scope amendment to IAS 19 Employee Benefits in the current year. Refer to Note 2 of our 2015 Annual
Consolidated Financial Statements for details of this change.
New and Amended International Financial Reporting Standards to be Adopted in 2016
Several amended IFRS were issued by the IASB that are effective for annual periods beginning on or after January 1, 2016, and are
expected to be adopted by us in 2016. These include amendments to IFRS 11 Joint Arrangements, IAS 16 Property, Plant and
Equipment, IAS 38 Intangible Assets, the standards amended by Annual Improvements to IFRSs 2012-2014 Cycle and Investment
Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28). Refer to Note 2 of our 2015 Annual
Consolidated Financial Statements for details of these changes.
In December 2014, Disclosure Initiative was issued, which amends IAS 1 Presentation of Financial Statements. The amendments are
designed to encourage entities to use professional judgment to determine what information to disclose in the financial statements and
accompanying notes by clarifying the guidance on materiality, presentation, and note structure. The amendments also require separate
disclosure of other comprehensive income attributable to joint ventures and associates, classified by nature. These amendments are
effective for annual periods beginning on or after January 1, 2016. We will provide this disclosure in our 2016 Consolidated Financial
Statements.
New and Amended International Financial Reporting Standards to be Adopted in 2017
or Later
The following new standards were issued by the IASB and are expected to be adopted by us in 2017 or later.
In May 2014, IFRS 15 Revenue from Contracts with Customers (“IFRS 15”) was issued, which replaces IAS 11 Construction Contracts,
IAS 18 Revenue and various interpretations. IFRS 15 establishes principles about the nature, amount, timing, and uncertainty of
revenue arising from contracts with customers. IFRS 15 requires entities to recognize revenue to reflect the transfer of goods or
services to customers measured at the amounts an entity expects to be entitled to in exchange for those goods or services. In
September 2015, the IASB deferred the effective date of IFRS 15 from January 1, 2017 to annual periods beginning on or after
January 1, 2018. IFRS 15 is to be applied retrospectively, or on a modified retrospective basis. Insurance and investment contracts are
not in the scope of this standard. We are currently assessing the impact the adoption of this standard will have on our Consolidated
Financial Statements.
86 Sun Life Financial Inc. Annual Report 2015 Management’s Discussion and Analysis