67 2. Summary of significant accounting policies continued Hedging instruments and hedge accounting  Cash and cash equivalents  Inventories  Inventories include assets held for sale in the ordinary course of business (finished goods), in the process of production (work in process) or in the form  of materials to be consumed in the production process (raw materials). Inventories are valued at the lower of cost and net realisable value. Cost, which  includes direct materials, labour and overhead, plus indirect overhead, is determined using the first-in, first-out (FIFO) method. Net realisable value is the  estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs to make the sale.  Cash and cash equivalents include highly liquid investments with original maturity dates of three months or less and are subject to an insignificant risk of  changes in value. The financial position cash and cash equivalents also includes deposits designated as hedging instruments.  If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts  previously recognised in equity remain in equity until the forecast transaction or the firm commitment occurs.  If the hedging instrument does not, or no longer, qualifies for hedge accounting because the qualifying criteria for hedge accounting are not, or are no  longer met, the derivative financial instruments are classified as held for trading and the deposits are classified as loans and receivables. Amounts  previously recognised in equity are transferred to profit or loss, if the transaction is no longer expected to occur.  For cash flow hedges, fair value changes of the effective portion of the hedging instrument are recognised in other reserves, net of applicable taxes,  while any ineffective portion of the fair value changes are recognised immediately in profit or loss. Amounts taken to equity are transferred to the  income statement when the hedged transaction affects the income statement, such as when the forecast or committed expenses occur. If the forecast  transaction or firm commitment is no longer expected to occur, amounts previously recognised in equity are transferred to profit or loss.  In a cash flow hedge, the variability of cash flows to be received or paid related to a recognised asset or liability, or a highly probable forecast transaction,  or a firm commitment (in case of currency risks) is hedged. To hedge a currency risk of an unrecognised firm commitment, the Group makes use of the  option to recognise this as a cash flow hedge. The documentation of the hedge relationship includes identification of the hedging instrument, the hedged  item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure  to changes in the hedged cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in  cash flows, and are assessed on an on-going basis to determine that they actually have been highly effective throughout the financial reporting periods  for which they were designated.  The Group did not enter into fair value hedges in 2012 and 2011.  If the requirements for hedge accounting set out in IAS 39 are met, the Group designates and documents the hedge relationship from the date a  derivative contract is entered into or the cash deposit is designated as a hedging instrument, either as a fair value hedge or a cash flow hedge.  The fair value of derivatives is equal to their positive or negative market value. The fair value of forward currency contracts is calculated by reference to  current forward exchange rates for contracts with similar maturity profiles. The fair value of the deposits was measured based on foreign currency  market rates at each reporting date.  Any gains and losses arising from changes in the fair value on derivatives and the deposits during the year that do not qualify for hedge accounting are  taken directly to profit or loss.  The Group uses derivative financial instruments, such as forward contracts, mainly for the purposes of hedging currency risks that arise from its  operating activities. Beside the derivative financial instruments the Group designated certain deposits as hedging instruments in order to hedge foreign  currency risks as well. Such derivative financial instruments and deposits were initially recognised at fair value on the date on which a derivative contract  was entered into or the cash deposit was designated as a hedging instrument and was subsequently remeasured at fair value on each subsequent  reporting date. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. 