Netflix Inc. (NFLX)
Analysis of Property, Plant and Equipment
Difficulty: Advanced
Property, Plant and Equipment Accounting Policy
Property and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the shorter of the estimated useful lives of the respective assets, generally up to 30 years, or the expected lease term for leasehold improvements, if applicable. Leased buildings are capitalized and included in property and equipment when Netflix was involved in the construction funding and did not meet the “sale-leaseback” criteria.
Source: 10-K (filing date: 2019-01-29).
Property, Plant and Equipment Disclosure
Netflix Inc., Statement of Financial Position, Property, Plant and Equipment
USD $ in thousands
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Leasehold improvements | 282,028 | 229,848 | 107,945 | 107,793 | 57,339 | ||||||
| Information technology | 224,296 | 223,850 | 185,345 | 194,054 | 189,274 | ||||||
| Furniture and fixtures | 63,667 | 49,217 | 32,185 | 30,914 | 25,758 | ||||||
| Buildings | 73,468 | 40,681 | 40,681 | 40,681 | 40,681 | ||||||
| Corporate aircraft | 62,560 | 30,039 | — | — | — | ||||||
| DVD operations equipment | 53,416 | 59,316 | 70,152 | 88,471 | 89,144 | ||||||
| Machinery and equipment | 1,692 | — | — | — | — | ||||||
| Land | 6,125 | — | — | — | — | ||||||
| Capital work-in-progress | 19,548 | 8,267 | 108,296 | 8,845 | 12,495 | ||||||
| Property and equipment, gross | 786,800 | 641,218 | 544,604 | 470,758 | 414,691 | ||||||
| Accumulated depreciation | (368,519) | (321,814) | (294,209) | (297,346) | (264,816) | ||||||
| Property and equipment, net | 418,281 | 319,404 | 250,395 | 173,412 | 149,875 |
Based on: 10-K (filing date: 2019-01-29), 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).
| Item | Description | The company |
|---|---|---|
| Property and equipment, gross | Amount before accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures. | Netflix Inc.’s property and equipment, gross increased from 2016 to 2017 and from 2017 to 2018. |
| Property and equipment, net | Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures. | Netflix Inc.’s property and equipment, net increased from 2016 to 2017 and from 2017 to 2018. |
Property, Plant and Equipment Ratios (Summary)
Netflix Inc., Property, Plant and Equipment Ratios
| Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | ||
|---|---|---|---|---|---|---|
| Average age | 47.21% | 50.19% | 54.02% | 63.16% | 63.86% |
Based on: 10-K (filing date: 2019-01-29), 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).
| Ratio | Description | The company |
|---|---|---|
| Average age | As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company’s fixed asset base is old or new. Newer assets are likely to be more efficient. | Netflix Inc.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 and from 2017 to 2018. |
Average Age
Based on: 10-K (filing date: 2019-01-29), 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).
2018 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property and equipment, gross – Land)
= 100 × 368,519 ÷ (786,800 – 6,125) = 47.21%
| Ratio | Description | The company |
|---|---|---|
| Average age | As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company’s fixed asset base is old or new. Newer assets are likely to be more efficient. | Netflix Inc.’s average age of depreciable property, plant and equipment improved from 2016 to 2017 and from 2017 to 2018. |