2022-23 SGI CANADA Annual Report
Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer's perspective, such as common
shares. All equity investments are classified as FVPL, except where the Corporation has elected, at initial recognition,
to irrevocably designate an equity investment at FVOCI. When this election is used, changes in fair value are recorded
in OCI and are not subsequently reclassified to net income, including on disposal. Impairment losses (and reversal
of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing a
return on such investments, are recognized in net income when declared.
The measurement basis for financial liabilities depends on whether the financial liabilities have been classified as
amortized cost or FVPL. Financial liabilities are classified as FVPL when they meet the definition of held for trading
or when they are designated as such at initial recognition. Financial liabilities classified as FVPL are measured at
fair value and changes in fair value are presented partially in OCI (the amount attributable to changes in credit risk
of the liability) and partially in net income (the remaining amount of change in fair value of the liability). Financial
liabilities not classified as FVPL are measured at amortized cost using the effective interest method, less provision for
impairment losses, if any.
The Corporation has designated cash and cash equivalents and investments as FVPL. Accounts receivable are
designated as amortized cost. Accounts payable and accrued liabilities, dividend payable and premium taxes
payable are designated as amortized cost. Unpaid claims recoverable from reinsurers, amounts due to reinsurers
and the provision for unpaid claims are exempt from the above requirement.
Financial assets and liabilities are offset, and the net amount reported in the Consolidated Statement of Financial
Position, only when there is a legally enforceable right to offset the recognized amounts and there is an intention to
settle on a net basis, or to realize the assets and liabilities simultaneously. Income and expenses are not offset in the
Consolidated Statement of Operations unless required or permitted by an accounting standard or interpretation,
as specifically disclosed in the accounting policies of the Corporation. There are no financial assets and liabilities
reported as offset in these consolidated financial statements.
Fair value of financial instruments
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 at the measurement date. All fair value measurements relate to recurring
measurements. Fair value measurements for investments are categorized into levels within a fair value hierarchy
based on the nature of the valuation inputs (Level 1, 2 or 3).
The three levels are based on the priority of inputs to the respective valuation technique. The fair value hierarchy
gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). An asset's or liability's classification within the fair value hierarchy is based
on the lowest level of significant input to its valuation. The input levels are defined as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities
The Corporation defines active markets based on the frequency of valuation and any restrictions or illiquidity on
disposition of the underlying investment and trading volumes. Assets measured at fair value and classified as Level 1
include the equity investment funds. Fair value is based on market price data for identical assets obtained from the
investment custodian, investment managers or dealer markets. The Corporation does not adjust the quoted price
for such investments.
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