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Netflix Inc. (NASDAQ:NFLX)

Analysis of Property, Plant and Equipment

Advanced level

Accounting Policy on Property, Plant and Equipment

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.

Source: 10-K (filing date: 2020-01-29).

Property, Plant and Equipment Disclosure

Netflix Inc., balance sheet: property, plant and equipment

US$ in thousands

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Land 6,125  6,125  —  —  — 
Buildings 33,141  73,468  40,681  40,681  40,681 
Leasehold improvements 354,999  282,028  229,848  107,945  107,793 
Furniture and fixtures 87,465  63,667  49,217  32,185  30,914 
Information technology 243,565  224,296  223,850  185,345  194,054 
Corporate aircraft 108,995  62,560  30,039  —  — 
Machinery and equipment 46,415  55,108  59,316  70,152  88,471 
Capital work-in-progress 100,521  19,548  8,267  108,296  8,845 
Property and equipment, gross 981,226  786,800  641,218  544,604  470,758 
Accumulated depreciation (416,005) (368,519) (321,814) (294,209) (297,346)
Property and equipment, net 565,221  418,281  319,404  250,395  173,412 

Based on: 10-K (filing date: 2020-01-29), 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).

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 2017 to 2018 and from 2018 to 2019.
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 2017 to 2018 and from 2018 to 2019.

Asset Age Ratios (Summary)

Netflix Inc., asset age ratios

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Average age ratio 42.66% 47.21% 50.19% 54.02% 63.16%

Based on: 10-K (filing date: 2020-01-29), 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).

Asset age ratio Description The company
Average age ratio 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 ratio of depreciable property, plant and equipment improved from 2017 to 2018 and from 2018 to 2019.

Average Age

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Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US$ in thousands)
Accumulated depreciation 416,005  368,519  321,814  294,209  297,346 
Property and equipment, gross 981,226  786,800  641,218  544,604  470,758 
Land 6,125  6,125  —  —  — 
Asset Age Ratio
Average age1 42.66% 47.21% 50.19% 54.02% 63.16%

Based on: 10-K (filing date: 2020-01-29), 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).

2019 Calculations

1 Average age = 100 × Accumulated depreciation ÷ (Property and equipment, gross – Land)
= 100 × 416,005 ÷ (981,226 – 6,125) = 42.66%

Asset age 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 ratio of depreciable property, plant and equipment improved from 2017 to 2018 and from 2018 to 2019.