2007 Annual Report - Sun Life Financial

Notes to the Financial Statements
As of and for the years ended December 31, 2007 and 2006
Financial assets carried at amortized cost
If there is objective evidence that an impairment loss on held-to-maturity investments carried at
amortized cost has been incurred, the amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated future cash flows, excluding future credit
losses that have not been incurred discounted at the financial asset’s original effective interest rate,
i.e., the effective interest rate computed at initial recognition. The carrying amount of the asset shall
be reduced directly. The amount of the loss shall be recognized in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss shall be reversed either directly or by adjusting an allowance account.
The reversal shall not result in a carrying amount of the financial asset that exceeds what the
amortized cost would have been had the impairment not been recognized at the date the impairment
is reversed. The amount of the reversal shall be recognized in profit or loss.
FINANCIAL LIABILItIES
Financial liabilities are recognized in the Companies’ financial statements when the Companies
become a party to the contractual provisions of the instrument. Financial liabilities are initially
recognized at fair value. Transaction costs are included in the initial measurement of all financial
liabilities.
Since the Companies do not have financial liabilities classified as at fair value through profit or
loss, all financial liabilities are subsequently measured at amortized cost using the effective interest
method, with interest expense recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a financial liability
and of allocating interest expense over the relevant period. The effective interest rate is the rate that
discounts estimated future cash payments through the expected life of the financial liability, or, when
appropriate, a shorter period.
Accruals are liabilities to pay for services that have been provided but have not been paid, invoiced
or formally agreed with the supplier. It is necessary to estimate the amount or timing of accruals;
however, the uncertainty is generally much less than for provisions.
Net assets attributable to shareholders
Net assets attributable to shareholders represent redeemable shares, which can be returned to the
Companies any time at the shareholder’s option for cash equal to a proportionate share of the
Companies’ net assets value and are classified as financial liabilities. Net assets attributable to
shareholders are carried at the redemption amount that is payable at the balance sheet date if the
shareholder exercised its right to put the share back to the Companies.
RELAtED PARtIES
Parties are considered related if one party has the ability to control the other party or exercise
significant influence over the other party in making financial and operating decisions. Individuals,
associates or companies that directly or indirectly control or are controlled by or are under common
control with the Companies are also considered related parties.
34 Prosperity Funds