2022-23 SGI CANADA Annual Report
Level 2: Quoted prices in markets that are not active or inputs that are observable either directly (i.e., as prices) or
indirectly (i.e., derived from prices)
Level 2 inputs include observable market information, including quoted prices for assets in markets that are
considered less active. Assets measured at fair value and classified as Level 2 include short-term investments and
bonds and debentures. Fair value for short-term investments and bonds and debentures is based on, or derived
from, market price data for same or similar instruments obtained from the investment custodian, investment
managers or dealer markets.
Level 3: Unobservable inputs that are supported by little or no market activity and are significant to the estimated
fair value of the assets or liabilities
Level 3 assets and liabilities include financial instruments whose values are determined using internal pricing
models, discounted cash flow methodologies, or similar techniques that are not based on observable market data,
as well as instruments for which the determination of estimated fair value requires significant management judgment
or estimation. Assets classified as Level 3 include the mortgage investment fund and real estate investment fund.
The fair value of these investments is based on the Corporation's shares of the net asset value of the respective fund,
as determined by its investment manager, and used to value purchases and sales of units in the investments.
The primary valuation methods used by the investment managers are as follows:
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The fair value for the mortgage investment fund is determined based on market values of the underlying
mortgage investments, calculated by discounting scheduled cash flows through to the estimated maturity of
the mortgages (using spread-based pricing over Government of Canada bonds with a similar term to maturity),
subject to adjustments for liquidity and credit risk.
The fair value of the real estate investment fund is determined based on the most recent appraisals of the
underlying properties. Real estate properties are appraised semi-annually by external, independent professional
real estate appraisers who are accredited through the Appraisal Institute of Canada. Real estate appraisals are
performed in accordance with generally accepted appraisal standards and procedures, and are based primarily
on the discounted cash flow and income capitalization methods.
The fair value of unquoted equity securities is determined by the income approach, through the use of discounted
cash flows.
The fair value of other financial assets and liabilities is considered to be the carrying value when they are of short
duration or when the investment's interest rate approximates current observable market rates. Where other
financial assets and liabilities are of longer duration, fair value is determined using the discounted cash flow method
using discount rates based on adjusted observable market rates. The fair values of accounts receivable, accounts
payable and accrued liabilities, dividend payable and premium taxes payable approximate their carrying values due
to their short-term nature.
Impairment of financial assets
The Corporation's trade receivables are subject to the expected credit loss model under IFRS 9. For trade
receivables, the Corporation applies the simplified approach to providing for expected credit losses prescribed
by IFRS 9, which requires the use of the lifetime expected loss provision for all trade receivables. In estimating the
lifetime expected loss provision, the Corporation considered historical default rates of past customers based on the
data available at March 31, 2023.
42 2022-23 SGI CANADA Annual ReportView entire presentation