75 AGL Energy Limited Annual Report 2011 Note 3 – Segment information Operating segments Unbilled revenue Exploration and evaluation expenditure The consolidated entity reports segment information on the same  basis as the internal management reporting structure, which drives  how the consolidated entity is organised and managed. The consolidated entity has identified its operating segments based  on the internal reports that are regularly reviewed and used by the  Board of Directors (the chief operating decision maker) in assessing  performance and in determining the allocation of resources. The consolidated entity recognises revenue from gas and electricity  services once the gas and/or electricity has been consumed by the  customer. Customers are billed on a periodic and regular basis.  Management estimates customer consumption between the last  invoice date and the end of the reporting period when determining  gas and electricity revenue for the financial period. Various  assumptions and financial models are used to determine the  estimated unbilled consumption. The carrying amount of unbilled  revenue is disclosed in Note 12. The consolidated entity’s policy for exploration and evaluation  expenditure is stated in Note 1(p). The application of this policy  requires management to make certain estimates and assumptions  as to future events and circumstances, particularly in relation to the  assessment of whether economic quantities of reserves have been  found. Any such estimates and assumptions may change as new  information becomes available. If, after having capitalised  exploration and evaluation expenditure, management concludes  that the capitalised expenditure is unlikely to be recovered by  future exploitation or sale, then the relevant capitalised amount will  be written off to the income statement. Management has determined the operating segments based on the  manner in which products are sold, whether retail or wholesale, and  the nature of the services provided. The consolidated entity has  four reportable operating segments as follows: No operating segments have been aggregated to form the above  reportable operating segments. In the segment financial results, the ‘Other’ category consists of  the various Corporate activities which includes the head office and  central support functions. Corporate is not considered a reportable  operating segment. The measurement of segment results is in line with the basis of  information presented to the Board of Directors for internal  management reporting purposes. The performance of each  segment is measured based on their ‘Operating EBIT contribution’  to the consolidated entity. Certain items of income and expense are  excluded from the segment results to show a measure of  underlying performance. These items include changes in fair value  of financial instruments and significant items. The consolidated entity estimates the future removal and  restoration costs of electricity generation assets, oil and gas  production facilities, wells, pipelines and related assets at the time  of installation of the assets. In most instances, removal of these  assets will occur many years into the future. The calculation of this  provision requires management to make assumptions regarding the  removal date, application of environmental legislation, the extent  of restoration activities required and available technologies. The  carrying amount of the provision for environmental restoration is  disclosed in Note 30. Various actuarial assumptions are utilised in the determination of  the consolidated entity’s defined benefit obligations. These  assumptions and the related carrying amounts are discussed in  Note 47. Transfer prices between operating segments are on an  arm’s-length basis in a manner similar to transactions with third  parties. Inter-segment revenue is eliminated on consolidation. The accounting policies of the reportable segments are the same as  the consolidated entity’s accounting policies. The consolidated entity measures the cost of equity-settled  transactions with employees by reference to the fair value of the  equity instruments at the date at which they are granted. The fair  value is determined by an external valuer using the Black-Scholes  and Monte Carlo simulation methods, with the assumptions  detailed in Note 48. The accounting estimates and assumptions  relating to equity-settled share-based payments would have no  impact on the carrying amounts of assets and liabilities within the  next annual reporting period but may impact expenses and equity. Management uses their judgement in selecting an appropriate  valuation technique for financial instruments not quoted in an active  market. Valuation techniques commonly used by market  practitioners are applied. For derivative financial instruments,  assumptions are made based on quoted market rates adjusted for  specific features of the instrument. Other financial instruments are  valued using a discounted cash flow analysis based on assumptions  supported, where possible, by observable market prices and rates.  Refer to Note 52 for further details. Fair value of fi nancial instruments Provision for environmental restoration Segment fi nancial results Defi ned benefit superannuation plans Share-based payment transactions – Retail Energy  is responsible for selling natural gas, electricity and  energy-related products and services to residential, small  business and commercial and industrial customers. – Merchant Energy  is responsible for developing, operating and  maintaining power generation assets and managing the risks  associated with the procurement and delivery of gas and  electricity for its wholesale portfolio and for the Retail Energy  segment. Merchant Energy also provides energy efficiency and  carbon management services. – Upstream Gas  is responsible for exploration, development and  production of coal seam gas, development and operation of gas  storage facilities and also exploration and development of  geothermal renewable energy sources. – Energy Investments  includes equity accounted investments in  the ActewAGL Retail Partnership and Greater Energy Alliance  Corporation Pty Limited.