Organization and Summary of Significant Accounting Policies
Description of Business
Netflix, Inc. (the "Company") was incorporated on August 29, 1997 and began operations on April 14, 1998. With 20 million subscribers as of December 31, 2010, the Company is an Internet subscription service streaming TV shows and movies. The Company's subscribers can instantly watch unlimited TV shows and movies streamed over the Internet to their TVs, computers and mobile devices and in the United States, subscribers can also receive DVDs delivered quickly to their homes.
The Company is organized into two operating segments, United States and International. In September 2010, the Company began international operations by offering an unlimited streaming plan without DVDs in Canada. Substantially all of the Company's revenues are generated in the United States, and all of the Company's long-lived assets are held in the United States. The Company's revenues are derived from monthly subscription fees.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.
Certain prior period balance sheet amounts have been reclassified to conform to the current presentation. These reclassifications did not significantly impact any prior amounts of reported total assets or total liabilities, and did not impact stockholders' equity, results of operations or cash flows.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates and assumptions include the estimate of useful lives of its content library; the valuation of stock-based compensation; and the recognition and measurement of income tax assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates.
Cash Equivalents and Short-term Investments
The Company considers investments in instruments purchased with an original maturity of 90 days or less to be cash equivalents. The Company classifies short-term investments, which consist of marketable securities with original maturities in excess of 90 days as available-for-sale. Short-term investments are reported at fair value with unrealized gains and losses included in accumulated other comprehensive income within stockholders' equity in the consolidated balance sheet. The amortization of premiums and discounts on the investments, realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in interest and other income in the consolidated statements of operations. The Company uses the specific identification method to determine cost in calculating realized gains and losses upon the sale of short-term investments.
Short-term investments are reviewed periodically to identify possible other-than-temporary impairment. When evaluating the investments, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, the Company's intent to sell, or whether it would be more likely than not that the Company would be required to sell the investments before the recovery of their amortized cost basis.
The Company obtains content through streaming content license agreements, DVD direct purchases and DVD and streaming revenue sharing agreements with studios, distributor
Free historical financial statements for Netflix Inc.
See how revenue, income, cash flow, and balance sheet financials have changed over 55 quarters since 2010. Compare with NFLX stock chart to see long term trends.
Data imported from Netflix Inc SEC filings. Check original filings before making any investment decision.