65 Financial assets held to maturity  Loans and receivables  Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are  not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value though profit or loss. These  embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Reassessment only occurs if there is a  change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.  The Group has not entered into trading actions nor designated financial asset as financial asset through profit or loss in 2012 and 2011.  Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Group has the  positive intention and ability to do so. After initial measurement, held-to-maturity investments are measured at amortised cost using the effective  interest method. The effective interest method takes into account any premium or discount on acquisition and includes transaction costs and fees that  are an integral part of the effective interest rate.  Gains and losses are recognised in profit or loss when the investments are de-recognised or impaired, as well as through the amortisation process. The  carrying amount of financial assets held-to-maturity are tested at each reporting date to determine whether there is objective, material evidence of  impairment as outlined in IAS 39.59. Any impairment losses caused by the fair value being lower than the carrying amount are recognised in 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 in a subsequent period the fair value increases and this increase can be related objectively to events occurring after the impairment was recognised,  the impairment loss is reversed to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. The fair value  which is required for impairment testing corresponds to the present value of the estimated future cash flows discounted using the original effective  interest rate.  Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted on an active market, such as trade  accounts receivable. Loans and receivables are recorded initially at fair value and do not bear interest. As of 31 December 2012 as well as 31 December  2011, loans and receivables of the Group comprise trade accounts receivable from customers, cash and cash equivalents (except for deposits designated  as hedging instruments). After initial recognition, loans and receivables are subsequently carried at amortised cost using the effective interest method,  less any allowance for impairment, if necessary.  Gains and losses are recognised in the income statement when the loans and receivables are de-recognised or impaired. Interest income and expense on  the application of the effective interest method are also recognised in profit or loss. The Group continuously reviews its allowance for doubtful accounts. Management considers the collectability of a trade account receivable to be  impaired when it is probable that the Group will be unable to collect all amounts due according to the sales terms, based on current information and  events regarding the customers’ ability to meet their obligations. The amount of the impairment loss on loans and receivables is measured as the  difference between the carrying amount of the asset and the present value of estimated future cash flows, discounted at the original effective interest  rate of the financial asset. The amount of the impairment loss is recognised in profit or loss.  If, in a subsequent reporting period, the amount of the impairment loss decreases, and the decrease can objectively be related to an event occurring  after the impairment was recognised, the previously recognised impairment loss is reversed and recognised in profit or loss.  When a trade receivable is considered to be impaired, any credit losses are included in the allowance for doubtful accounts through a charge to bad  debt expenses. Account balances are set off against the allowance after all means of collection have been exhausted and the potential for recovery is  considered remote. Recoveries of trade receivables previously written-off are recorded as other income when received. Reversals of impairment losses are  recognised in profit and loss. The Group does not have any off-balance sheet credit exposure related to its customers.  Receivables from work in process for customer specific development projects according to IAS 11 are recorded in the balance sheet line “trade accounts  receivable and other receivables” and are disclosed in the notes respectively.  2. Summary of significant accounting policies continued