2007 Annual Report - Sun Life Financial

FINANCIAL ASSEtS
Financial assets are recognized in the Companies’ financial statements when the Companies become
a party to the contractual provisions of the instrument. Financial assets are recognized initially at
fair value. Transaction costs are included in the initial measurement of all financial assets, except
for investments classified as at fair value through profit or loss. In a regular way purchase or sale,
financial assets are recognized and derecognized, as applicable, using settlement date accounting.
Financial assets are derecognized by the Companies when:
a. the contractual rights to the cash flows from the financial asset expire; or
b. the contractual rights to receive cash flows have been transferred.
Other than cash and receivables, the Companies’ financial assets include investments at fair value
through profit or loss and held-to-maturity investments.
Investments at fair value through profit or loss
Financial assets are classified as investments at fair value through profit or loss when they are
acquired for trading or are designated upon initial recognition. Unless designated and considered as
effective hedging instruments, derivatives are classified at fair value through profit or loss. Financial
assets under this category are carried at fair value with gains and losses arising from changes in fair
value being included in the profit or loss for the period.
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or
loss recognized in profit or loss. The net gain or loss recognized in statements of income incorporates
any dividend or interest earned on the financial asset.
Loans and receivables
Loans that have fixed or determinable payments that are not quoted in an active market are
classified as loans and receivables. Loans and receivables are measured at amortized cost using
the effective interest method, less any impairment. Interest income is recognized by applying
the effective interest rate, except for short-term receivables the recognition of interest would be
immaterial.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments that the Companies intend and are able to hold to maturity and that do not meet the
definition of loans and receivables and are not designated on initial recognition as assets at fair
value through profit or loss or as available-for-sale. Held-to-maturity investments are measured at
amortized cost.
The effective interest method is a method of calculating the amortized cost of a financial asset and of
allocating interest income over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset, or, when
appropriate, a shorter period.
IMPAIRMENt OF FINANCIAL ASSEtS
The Companies assess at each balance sheet date whether there is any objective evidence that a
financial asset or group of financial assets is impaired.
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