Netflix Case Questions:

1. What method of content amortization should Netflix use for the streaming agreements? (Straight-line vs. accelerated)? Why?

2. Which method of amortization best matches the actual usage of the asset?

3. Should the streaming content acquired (but not created) by Netflix be listed as an asset, why or why not?

4. Are you concerned with the lower rate of content amortization under the streaming strategy versus the DVD-by-mail strategy?

5. What will be the impact on Netflixs net income of the lower content amortization under the new streaming strategy?

6. Under the asset recognition criteria, some content agreements do not qualify as assets. Therefore, the asset and associated liability would not appear on the balance sheet. Should this be a concern for investors? Why?