Sun Life 2010 Annual Report Download - page 36

Explanation of Significant Adjustments from Canadian GAAP to IFRS
1. IFRS 1 Optional Exemptions (Choice)
IFRS 1 requires retrospective application of all IFRS standards with certain optional exemptions and mandatory exceptions. Where the
information for retrospective application of a standard is not readily available, impractical or is cost prohibitive, we have elected to take
the following optional exemptions available under IFRS 1.
(i) The option to reset all cumulative foreign currency translation differences recorded in accumulated OCI to zero through
retained earnings
(ii) The option to recognize all cumulative unrecognized actuarial gains and losses on defined benefit plans under Canadian
GAAP. The cumulative amount of actuarial losses recorded on our defined benefit pension plans and other benefits plans has
been recognized in retained earnings.
(iii) We have taken the option not to restate the accounting for business combinations or acquisitions made prior to the Transition
Date. As a result no adjustments were required to retained earnings or other balances as a result of the adoption of IFRS.
Other IFRS standards contain mandatory accounting rules for classification and measurement as well as some choices. The
explanations for the key remaining adjustments identify the nature of the policy difference.
2. Impairment of Goodwill (Mandatory)
Canadian GAAP IFRS
Goodwill is assessed for impairment annually by comparing the
carrying values of the appropriate reporting units to their
respective fair values. Our reporting units align substantially with
our reportable segments – SLF Canada, SLF U.S., MFS, SLF
Asia, and Corporate.
Goodwill is assessed for impairment at a more granular level
than under Canadian GAAP. The more granular units under
IFRS are referred to as cash generating units (“CGUs”), which
is the smallest identifiable group of assets that generate cash
inflows that are largely independent of the cash inflows from
other assets or groups of assets. Reporting units such as SLF
Canada and SLF U.S, now consist of a number of CGU’s.
Goodwill acquired on prior business combinations has been
allocated to the CGU’s expected to benefit from the
combination at the time of the acquisition.
As a result of this accounting policy difference, we have recorded a goodwill impairment charge to opening equity which relates
to substantially all of the goodwill recorded on the acquisition of Keyport Life Insurance Company in the United States in 2001
($1.1 billion) allocated to the Fixed Annuity CGU within SLF U.S. and a portion of the goodwill recorded on the acquisition of Clarica in
Canada in 2002 ($0.6 billion) allocated to the Individual business in SLF Canada. This impairment charge reflects the application of
IFRS standards based on the economic environment at the Transition Date.
3. Remeasurement of Assets (Choice/Mandatory)
The table below highlights the measurement differences upon transition to IFRS on invested assets and property and equipment.
These assets support insurance contracts, investment contracts or surplus.
Canadian GAAP IFRS
a) Real estate
Properties held to earn rental income or capital appreciation,
whether or not any part of the property is owner occupied, are
measured using the moving average market method where the
carrying value is adjusted towards fair value at 3% of the
difference each quarter. Similarly, any realized gains or losses
are deferred and amortized into income at the rate of 3% of the
unamortized balance each quarter.
Investment property (Choice)
Properties held predominantly to earn rental income or capital
appreciation are classified as investment property and can be
measured using either the fair value or cost model. We have
chosen to measure these properties using the fair value model
at each reporting period with the change reported in income.
Realized gains or losses are recorded in income at the time of
sale.
Property and equipment (Choice)
The remaining properties with significant owner occupancy are
classified as property and equipment under IFRS and can be
measured using the cost model or revaluation model We have
chosen to measure these properties using the cost model,
which measures the property at cost less accumulated
depreciation. Realized gains or losses are recorded in income
at the time of sale.
Deferred net realized gains (Mandatory)
The unamortized balance of realized gains or losses under
Canadian GAAP has been reversed on transition to IFRS.
b) Private debt instruments
Private debt Instruments not quoted in an active market are
measured at fair value
(Mandatory)
Private debt instruments not quoted in an active market are
considered loans and receivables and are recorded at
amortized cost under IFRS
c) Limited partnerships and private equities
Investments in limited partnerships and private equities that are
not quoted in an active market are measured at cost.
(Mandatory)
Under IFRS the measurement of these investments has
changed to fair value, where the fair value can be reliably
measured. For those investments where fair value cannot be
reliably measured, they continue to be measured at cost.
32 Sun Life Financial Inc. Annual Report 2010 Management’s Discussion and Analysis