Sun Life 2015 Annual Report Download - page 99

Significant estimates and judgments have been made in the following areas and are discussed as noted:
Insurance contract and investment contract
assumptions and measurement
Note 1 Insurance Contract Liabilities and Investment Contract Liabilities
Note 11 Insurance Contract Liabilities and Investment Contract Liabilities
Determination of fair value Note 1 Basis of Consolidation
Note 1 Determination of Fair Value
Note 3 Acquisitions
Note 5 Total Invested Assets and Related Net Investment Income
Impairment of financial instruments Note 1 Financial Assets Excluding Derivative Financial Instruments
Note 6 Financial Instrument Risk Management
Income taxes Note 1 Income Taxes
Note 21 Income Taxes
Pension plans Note 1 Pension Plans and Other Post-Retirement Benefits
Note 26 Pension Plans and Other Post-Retirement Benefits
Goodwill and intangible asset impairment Note 1 Goodwill
Note 1 Intangible Assets
Note 10 Goodwill and Intangible Assets
Determination of control for purpose of consolidation Note 1 Basis of Consolidation
Note 17 Interests in Other Entities
Basis of Consolidation
Our Consolidated Financial Statements include the results of operations and the financial position of subsidiaries, which includes
structured entities controlled by us, after intercompany balances and transactions have been eliminated. Subsidiaries are fully
consolidated from the date we obtain control, and deconsolidated on the date control ceases. The acquisition method is used to
account for the acquisition of a subsidiary from an unrelated party at the date that control is obtained, with the difference between the
consideration transferred and the fair value of the subsidiary’s net identifiable assets acquired recorded as goodwill. Judgment is
required to determine fair value of the net identifiable assets acquired in a business combination.
We control an entity when we have power over an entity, exposure to or rights to variable returns from our involvement with an entity,
and the ability to affect our returns through our power over an entity. Power exists when we have rights that give us the ability to direct
the relevant activities, which are those activities that could significantly affect the entity’s returns. Power can be obtained through voting
rights or other contractual arrangements. Judgment is required to determine the relevant activities and which party has power over
these activities. When we have power over and variable returns from an entity, including an investment fund that we manage, we also
apply significant judgment in determining whether we are acting as a principal or agent. To make this determination, we consider
factors such as how much discretion we have regarding the management of the investment fund and the magnitude and extent of
variability associated with our interests in the fund. If we determine we are the principal rather than the agent, we would consolidate the
assets and liabilities of the fund. Interests held by external parties in investment funds that we consolidate are recorded as third-party
interest in consolidated investment funds in Other liabilities. If we lose control of an entity, the assets and liabilities of that entity are
derecognized from our Consolidated Statements of Financial Position at the date at which control is lost and any investment retained is
remeasured to fair value.
A joint venture exists when SLF Inc., or one of its subsidiaries, has joint control of a joint arrangement and has rights to the net assets
of the arrangement. Joint control is the contractually agreed sharing of control and exists only when the decisions about the relevant
activities require the unanimous consent of the parties sharing control. Associates are entities over which SLF Inc. or its subsidiaries
are able to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions
of an investee but not have control or joint control over those decisions. Significant influence is generally presumed to exist when SLF
Inc. or its subsidiaries holds greater than 20% of the voting power of the investee but does not have control or joint control. The equity
method is used to account for our interests in joint ventures and associates. A joint operation exists when SLF Inc., or one of its
subsidiaries, has joint control of an arrangement that gives it rights to the assets and obligations for the liabilities of the operation,
rather than the net assets of the arrangement. For joint operations, we record our share of the assets, liabilities, revenue and expenses
of the joint operation. Judgment is required to determine whether contractual arrangements between multiple parties results in control,
joint control or significant influence, with consideration of the relevant activities of the entity, voting rights, representation on boards of
directors and other decision-making factors. Judgment is also required to determine if a joint arrangement is a joint venture or joint
operation, with consideration of our rights and obligations and the structure and legal form of the arrangement.
Determination of Fair Value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants. Fair value is measured using the assumptions that market participants would use when pricing an asset or liability. We
determine fair value by using quoted prices in active markets for identical or similar assets or liabilities. When quoted prices in active
markets are not available, fair value is determined using valuation techniques that maximize the use of observable inputs. When
observable valuation inputs are not available, significant judgment is required to determine fair value by assessing the valuation
techniques and valuation inputs. The use of alternative valuation techniques or valuation inputs may result in a different fair value.
A description of the fair value methodologies, assumptions, valuation techniques, and valuation inputs by type of asset is included in
Note 5.
Notes to Consolidated Financial Statements Sun Life Financial Inc. Annual Report 2015 97