66 Dialog Semiconductor Plc | Annual report and accounts 2012  |  Section 4 | Consolidated financial statements and notes Notes to the consolidated financial statements For the year ended 31 December 2012  Available-for-sale financial assets  2. Summary of significant accounting policies continued Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as loans and  receivables, held-to-maturity investments or as financial assets at fair value through profit or loss. After initial measurement available-for-sale financial assets are measured at fair value. Unrealised gains and losses, net of the related tax effect, on  available-for-sale financial assets are excluded from earnings and are reported as a component of other reserves until realised, or the investment is  determined as being impaired.  At each reporting date, the carrying amounts of available-for-sale assets are assessed to determine whether there is objective, significant evidence of  impairment as outlined in IAS 39.59. Any impairment losses on available-for-sale financial assets are charged to profit or loss. The Group does not use  allowance accounts in order to record the impairment in the statement of financial position but credits the impairment loss directly against the book  value of the financial assets. If this impairment relates to losses previously recognised in equity then the impairment loss is transferred from equity to the  income statement. Reversals of impairment losses in respect of equity instruments or investment funds that are classified as available-for-sale are not  recognised in profit or loss. Reversals of impairment losses on debt instruments are reversed through profit or loss if the increase in fair value of the  instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.  The fair value of available-for-sale financial assets actively traded in organised financial markets is determined by reference to quoted market bid prices  at the close of business on the reporting date.  For investments in which there is no active market, fair value is determined using valuation techniques, including recent arm’s length market transactions;  reference to the current market value of another instrument which is substantially the same; discounted cash flow analysis; or other valuation models. If  the fair value of unquoted equity instruments cannot be measured with sufficient reliability, these instruments are measured at cost (less any impairment  losses, if applicable).  A financial asset is derecognised when:  Derecognition of financial assets   the right to receive cash flows from the asset have expired;   the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third  party under a “pass through agreement”; or   the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the  asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.  When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and  rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the  derecognition as receivables under factoring agreement.  Financial liabilities primarily include trade accounts payable, liabilities due to banks, derivative financial liabilities and other liabilities.  After initial recognition at fair value, less directly attributable transaction costs, financial liabilities are subsequently measured at amortised cost using the  effective interest method.  Financial liabilities at fair value through profit or loss include liabilities held for trading and financial liabilities designated upon initial recognition as at fair  value through profit or loss. Gains and losses on liabilities held for trading are recognised in profit or loss.  During the financial years 2012 and 2011 the Group did not classify any financial liabilities as financial liabilities at fair value through profit or loss.  A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.  Derecognition of financial liabilities  Financial liabilities at fair value through profit or loss  Financial liabilities measured at amortised costs  Financial liabilities 