Notes to Consolidated Financial Statements  Years ended December 31, 2012 and 2011 3. Summary of Significant Accounting Policies (continued) Investments in marketable securities Debt Derivative instruments Hedging Inventories Teck 2012 Annual Report 84 Finished products, work in-process and raw materials inventories are valued at the lower of weighted average cost and  net realizable value. Raw materials include concentrates for use at smelting and refining operations. Work in-process  inventory includes inventory in the milling, smelting or refining process and stockpiled ore at mining operations. For work in-process and finished product inventories, cost includes all direct costs incurred in production, including  direct labour and materials, freight, depreciation and amortization and directly attributable overhead costs. Waste rock  stripping costs related to mine production are included in the cost of inventories as incurred. For hedges of net investments in foreign operations, any foreign exchange gains or losses on the hedging instrument  relating to the effective portion of the hedge are initially recorded in other comprehensive income. Gains and  losses are recognized in profit on the ineffective portion of the hedge, or when there is a disposal of a foreign operation  being hedged. For cash flow hedges, any unrealized gains and losses on the hedging instrument relating to the effective portion of the  hedge are initially recorded in other comprehensive income. Gains and losses are recognized in profit upon settlement  of the hedging instrument, when the hedged item ceases to exist, or when the hedge is determined to be ineffective. Certain derivative investments may qualify for hedge accounting. For fair value hedges, any gains or losses on both  the hedged item and the hedging instrument are recognized in profit. Derivative instruments, including embedded derivatives, are recorded at fair value through profit or loss and, accordingly,  are recorded on the balance sheet at fair value. Unrealized gains and losses on derivatives held for trading are recorded  as part of other operating income (expense) or non-operating income (expense) in profit depending on the nature  of the derivative. Fair values for derivative instruments are determined using valuation techniques, with assumptions  based on market conditions existing at the balance sheet date or redemption date of the derivative. Derivatives  embedded in non-derivative contracts are recognized separately unless they are closely related to the host contract. Debt is initially recorded at total proceeds received less direct issuance costs. Debt is subsequently measured at  amortized cost, calculated using the effective interest rate method. At each balance sheet date, we assess for any objective evidence of an impairment in value of our investments and  record such impairments in profit for the period. If an impairment of an investment in a marketable equity security has  been recorded in profit, it cannot be reversed in future periods. Investments in marketable securities are designated as available-for-sale and recorded at fair value. Fair values are  determined by reference to quoted market prices at the balance sheet date. Unrealized gains and losses on available- for-sale investments are recognized in other comprehensive income until investments are disposed of or when there is  objective evidence of an impairment in value. Investment transactions are recognized on the trade date with transaction  costs included in the underlying balance.