Income Tax Accounting Policy
Income Tax Expense (Benefit)
Effective Income Tax Rate (EITR)
Components of Deferred Tax Assets and Liabilities
Deferred Tax Assets and Liabilities, Classification
Analyst Adjustments: Removal of Deferred Taxes
Adjusted Ratios: Removal of Deferred Taxes (Summary)
Adjusted Current Ratio
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Netflix records a provision for income taxes for the anticipated tax consequences of the reported results of operations using the asset and liability method. Deferred income taxes are recognized by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits for which future realization is uncertain.

Netflix did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. Netflix may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Netflix recognizes interest and penalties related to uncertain tax positions in income tax expense.

Source: 10-K (filing date: 2018-01-29).

Netflix Inc., income tax expense (benefit), continuing operations

USD $ in thousands

	12 months ended	Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014		Dec 31, 2013
	Federal
	State
	Foreign
	Current tax provision
	Federal
	State
	Foreign
	Deferred tax provision
	Provision for (benefit from) income taxes

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

Item	Description	The company
Current tax provision	Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations.	Netflix Inc.’s current tax provision increased from 2015 to 2016 and from 2016 to 2017.
Deferred tax provision	Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.	Netflix Inc.’s deferred tax provision increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Provision for (benefit from) income taxes	Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Netflix Inc.’s provision for (benefit from) income taxes increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Netflix Inc., effective income tax rate (EITR) reconciliation

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	U.S. federal statutory tax rate
	Effective income tax rate

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

Item	Description	The company
Effective income tax rate	Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.	Netflix Inc.’s effective income tax rate increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Netflix Inc., components of deferred tax assets and liabilities

USD $ in thousands

		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014		Dec 31, 2013
	Stock-based compensation
	Accruals and reserves
	Depreciation and amortization
	Federal and California R&D tax credits
	Federal foreign tax credits
	Other
	Gross deferred tax assets (liabilities)
	Valuation allowance
	Net deferred tax assets (liabilities)

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

Item	Description	The company
Net deferred tax assets (liabilities)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting.	Netflix Inc.’s net deferred tax assets (liabilities) increased from 2015 to 2016 and from 2016 to 2017.

Netflix Inc., deferred tax assets and liabilities, classification

USD $ in thousands

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Deferred tax assets (classified as Other current assets)
	Deferred tax assets (classified as Other non-current assets)

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

Item	Description	The company
Deferred tax assets (classified as Other non-current assets)	Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent.	Netflix Inc.’s deferred tax assets (classified as Other non-current assets) increased from 2015 to 2016 and from 2016 to 2017.

Netflix Inc., adjustments to financial data

USD $ in thousands

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Adjustment to Current Assets
	Current assets (as reported)
	Less: Current deferred tax assets, net
	Current assets (adjusted)
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Current deferred tax assets, net
	Less: Noncurrent deferred tax assets, net
	Total assets (adjusted)
	Adjustment to Stockholders’ Equity
	Stockholders’ equity (as reported)
	Less: Net deferred tax assets (liabilities)
	Stockholders’ equity (adjusted)
	Adjustment to Net Income
	Net income (as reported)
	Add: Deferred income tax expense (benefit)
	Net income (adjusted)

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

Netflix Inc., Financial Data: Reported vs. Adjusted

Netflix Inc., adjusted ratios

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Current Ratio
	Reported current ratio
	Adjusted current ratio
	Net Profit Margin
	Reported net profit margin
	Adjusted net profit margin
	Total Asset Turnover
	Reported total asset turnover
	Adjusted total asset turnover
	Financial Leverage
	Reported financial leverage
	Adjusted financial leverage
	Return on Equity (ROE)
	Reported ROE
	Adjusted ROE
	Return on Assets (ROA)
	Reported ROA
	Adjusted ROA

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Netflix Inc.’s adjusted current ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Netflix Inc.’s adjusted net profit margin improved from 2015 to 2016 and from 2016 to 2017.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Netflix Inc.’s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Netflix Inc.’s adjusted financial leverage increased from 2015 to 2016 and from 2016 to 2017.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Netflix Inc.’s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Netflix Inc.’s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017.

Netflix Inc., Ratios: Reported vs. Adjusted

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	As Reported
	Selected Financial Data (USD $ in thousands)
	Current assets
	Current liabilities
	Ratio
	Current ratio¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in thousands)
	Adjusted current assets
	Current liabilities
	Ratio
	Adjusted current ratio²

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

2017 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities.	Netflix Inc.’s adjusted current ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	As Reported
	Selected Financial Data (USD $ in thousands)
	Net income
	Revenues
	Ratio
	Net profit margin¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in thousands)
	Adjusted net income
	Revenues
	Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

2017 Calculations

¹ Net profit margin = 100 × Net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

² Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by total revenue.	Netflix Inc.’s adjusted net profit margin improved from 2015 to 2016 and from 2016 to 2017.

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	As Reported
	Selected Financial Data (USD $ in thousands)
	Revenues
	Total assets
	Ratio
	Total asset turnover¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in thousands)
	Revenues
	Adjusted total assets
	Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

2017 Calculations

¹ Total asset turnover = Revenues ÷ Total assets
= hidden ÷ hidden = hidden

² Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Netflix Inc.’s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	As Reported
	Selected Financial Data (USD $ in thousands)
	Total assets
	Stockholders’ equity
	Ratio
	Financial leverage¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in thousands)
	Adjusted total assets
	Adjusted stockholders’ equity
	Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

2017 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Netflix Inc.’s adjusted financial leverage increased from 2015 to 2016 and from 2016 to 2017.

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	As Reported
	Selected Financial Data (USD $ in thousands)
	Net income
	Stockholders’ equity
	Ratio
	ROE¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in thousands)
	Adjusted net income
	Adjusted stockholders’ equity
	Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

2017 Calculations

¹ ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Netflix Inc.’s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017.

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	As Reported
	Selected Financial Data (USD $ in thousands)
	Net income
	Total assets
	Ratio
	ROA¹
	Adjusted for Deferred Taxes
	Selected Financial Data (USD $ in thousands)
	Adjusted net income
	Adjusted total assets
	Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2018-01-29), 10-K (filing date: 2017-01-27), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-02-03).

2017 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Netflix Inc.’s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017.

	Netflix Inc.	Other companies (not purchased previously)
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Financial Statements
Common-Size Financial Statements
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Discounted Cash Flow (DCF) Valuation
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Analysis
Financial Reporting Quality

Netflix Inc. (NFLX)

Analysis of Income Taxes

Income Tax Accounting Policy

Income Tax Expense (Benefit)

Effective Income Tax Rate (EITR)

Components of Deferred Tax Assets and Liabilities

Deferred Tax Assets and Liabilities, Classification

Analyst Adjustments: Removal of Deferred Taxes

Netflix Inc., Financial Data: Reported vs. Adjusted

Adjusted Ratios: Removal of Deferred Taxes (Summary)

Netflix Inc., Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)