This excerpt taken from the E 20-F filed Jun 24, 2005.
Eni capitalizes goodwill and amortizes it over its useful economic life, which is not to exceed 20 years from the date of acquisition. The assessment of useful economic life involves management making judgments and assumptions over the nature of the acquired business, the economic environment in which it operates, and the period of time over which the value of the business is expected to exceed the value of assets. Different assumptions and judgments may lead to a different amortization charge being recognized in income during the period. Under U.S. GAAP goodwill is not amortized, instead it is subjected to an annual impairment test. This annual impairment test includes two steps, firstly it is determined whether the fair value of the reporting unit, which holds a portion or all of the goodwill, exceeds the reporting unit's carrying value (inclusive of goodwill). If the fair value of the reporting unit exceeds the carrying value no further action is required, however, if the reporting unit's carrying value exceeds it's fair value a second step is required. Step two of the test is to determine an estimated fair value for the goodwill. This is done by allocating the fair value of the reporting unit amongst its assets and liabilities to determine an indirect estimated fair value of goodwill. If the assessed fair value of goodwill is lower than the carrying amount an impairment charge is recognized for the difference between the two. Central to the annual impairment test for goodwill is the determination of estimated fair value amounts. Management most commonly estimates fair values by discounting future estimates of cash flows, therefore, the outcome of the impairment test is sensitive to future cash flow estimates and changes thereto and the selection of the rate at which to discount the future cash flow estimates.