Under which expense account Netflix presents the amortization expense of content assets in the income statement? State the expense account and explain.
Select Excerpts from Netflix's Notes to the Statements Streaming Content The Company acquires, licenses and produces content, mlading original programming, order to offer members unlimited viewing of TV series and films. The content licenses are for a fixed fee and specific windows of aviability Payments for certain content licenses and the production of content require more upfront cash payments relative to the mortization expense Payments for content, including addition to streaming assets and the changes in related liabilities, are classified within "Net cash used in operating active on the Connolidated States of Cash Flows The Company recognizes content assets licensed and produced) as Non-current content assets, ser co the Consolidated Balance Sheets. For licenses, the Company capitalizes the fee per title and records corresponding liability at the gross mot of the labelity when the license penod begins, the cost of the title is known and the title is accepted and available for streaming For productions, the Company capitales costs associated with the production, including development costs, direct costs and production overhead Participations and residuals are expensed in lune with the amortization of production costs 3. Balance Sheet Components Content Assets Content assets consisted of the following As of December 31. 2019 2018 (is thod) 14,703,352 $ 14,081,463 Licensed content, et Produced content, et Released, less amortization In producto In development and preproduction 4.382.685 4,750,664 667866 9,801 215 2.403,896 3,305 126 311.842 6,020,364 Total 5 24.504.567 5 20,102 327 $ Current contestants, Non current contentes, 5 5 5,151,186 14.951,141 24.504567 5 As of December 31, 2019. proximately 55,793 million, 53,733 lion, and 52,515 e of the 514,703 mullo mortured cost of the licensed content is expected to be more in each of the next three years. As of December 31, 2019.pemately 51552 ml, 51,187 million and $882 lion of the $4.383 million sorted cost of the produced content has been released is expected to be worted in each of the best three years As of December 31, 2019, the mount of accrued participates and medals was not material The following table opere the meetination of streaming content Year coded December 31 2017 Licensed cosi Produced cool Totaltung 5 . 6.511.69 1.030,199 7.342.7995 1973.40 9.216.247 5 5.680, 373 317.444 6.197,617 7,532.05 $ CONSOLIDATED STATEMENTS OF CASHFLOWS (in thousands) Year Eaded December 31, 2018 2019 2017 $ 1.866.916 5 1.211,242 $ 558 929 (13.916,683) (694,011) 9.216.247 103,579 405.376 228.230 (45.576) (94.443) (13,043,437) 999.880 7,532,088 83.157 320,657 81.640 (73.953) (85.520) (9,805,763) 900,006 6,197,817 71.911 182.209 117,864 140,790 (208688) (232.113) 96.063 157.778 163.846 (122.531) (2.887,322) (200.192) 199.198 150.422 142.277 2.062 (2.680.479) (234,090) 74,559 114,337 177.974 (73,803) (1,785.948) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash used in operating activities: Additions to streaming content assets Change in streaming couteat liabilities Amortization of streaming contest assets Depreciation and amortization of property, equipment and intangibles Stock based compensation expense Other non-cash items Foreign currency remeasurement loss (gain) on long-term debe Deferred taxes Changes in operating assets and liabilities: Other current assets Accounts payable Accrued expenses and other liabilities Deferred revenue Other non-cotent amets and liabilities Net cash used in operating activities Cash flows from investing activities: Purchases of property and equipment Change in other assets Purchases of short-term investments Proceeds from sale of short-term investinents Proceeds from matures of short-term investments Net cash provided by used in investing activities Cash flows from financing activities: Proceeds from ince of debe Debt isance costs Proceeds from instance of common stock Other financing activities Net cash provided by financing activities Effect of exchange rate changes ca cash, cath equivalents and restricted cash Net increase in cash cash equivaleat ad restricted cash Cash cash equivalents and restricted cash, beginning of year Cash.cash equivalents and restricted cash end of year Supplemental disclosure Income taxes paid Interest paid (253,035) (134.029) (173.946) (165,174) (173,302) (60.409) (74.819) 320,154 22,705 34329 387,066) (339,120) 4.469 306 (36.134) 72,490 4,505,662 469 1.231.745 3,812.041 5,043,786 5 3.961.852 (35,871) 124.502 (1.956) 4,048,527 (39.682) 989.246 2.822.795 3,812,0415 3,020,510 (32,153) 38 378 255 3,076.990 29.848 1,355.219 1.467.576 2,822.795 $ $ 5 400,658 599,132 131,069 375.831 113.55 213.313 Streaming Content The Company acquires, licenses and produces content, including orginal programming, in order to offer members limited viewing of TV series and films The content licenses are for a fixed fee and specific windows of availability Payment terms for certain content licenses and the production of content require more upfront cash payments relative to the amortization expense Payments for content, including additions to streaming assets and the changes in related lubilities, are classified within "Net cash used in operating activities on the Consolidated Statements of Cash Flows The Company recognizes contest assets (licensed and produced) as Non-current contest assets, er on the Consolidated Balance Sheets. For licenses, the Company capitalizes the fee per title and records a corresponding liability at the gross amount of the liability when the license period begins, the cost of the title is known and the title is accepted and available for streaming for productions, the Company capitalizes costs associated with the production, including development costs, direct costs and production overhead. Participations and residuals are expensed in line with the amortization of production costs. Balance Sheet Components Content Assets Content assets consisted of the following As of December 31. 2019 2013 in thousands) 14.703 3525 14,081.463 Licensed content, net Produced content, bet Released, less amortization In production In development and pre-production 4.382.685 4,750 664 667 566 9301.215 2.403 896 3,305, 126 311,842 6,020,864 $ 24.504,567 S 20,1327 Total Curreat content assets, bet Noncurrent content assets, net $ $ 5 24.504.567 5 5.151,186 14.951,141 As of December 31, 2019, approximately 55,793 million, 53,733 mulla and 52 518 mallion of the 514,703 mullaon uanamortized cost of the licensed content is expected to be amortized in each of the next three years. As of December 31, 2019, approximately $1.552 million, 51,187 million and $882 million of the 54,363 million amortized cost of the produced content that has been released is expected to be amortured in each of the best free years As of December 31, 2019, the amount of accrued participations and readuls was not material The following table represents the amortization of streaming content assets Year ended December 31 2017 $ Licensed content Produced content Total streaming content 7.242.799 1.973,44 9216247 and) 6,511.689 1.020 399 7.532.088 5.680 373 517.444 6.197.817 $ 5 5 CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2018 2017 2019 $ 558929 1.866.916 1.211.242 $ (13.916,683) (694,011) 9.216.242 103,579 405.376 228.230 (45,576) (94.443) (13,043,437) 999,880 7,532,088 83,157 320,657 81,640 (73.953) (85.520) (9,805,763) 900,006 6,197,817 71 911 182.209 117,864 140,790 (208,688) (252,113) 96,063 157.778 163,846 (122,531) 2.887,322) (200,192) 199.198 150.422 142,277 2,062 (2.680.479) (234,090) 74,559 114,337 177.974 (73,803) (1,783.948) Cash flows from operating activities: Net income Adjustments to reconcile set income to net cash used in operating activities Additions to streaming content assets Change in streaming content liabilities Amortization of streaming content assets Depreciation and mortization of property, equipment and intangibles Stock-based compensation expense Other non-cash items Foreign currency remeasurement lou (gain) on long-term debe Deferred taxes Changes in operating assets and liabilities Other current wets Accounts payable Accred expenses and other linbilities Deferred reventie Other non-current annets and liabilities Net cash used in operating activities Cash flows from investing activities: Purchases of property and equipment Change in other assets Purchases of short term investments Proceeds from sale of short-term investments Proceeds from maturities of short-term investments Net cash provided by med in) investing activities Cash flows from financing activities: Proceeds from face of debt Debt isance costs Proceeds from imance of common stock Other financing activities Net cash provided by financing activities Effect of exchange rate changes on cash, cash equivalents and restricted canh Net increase in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash, beginning of year Cash, cash equivalents and restricted cash end of year Supplemental disclosure: Income taxes paid (253,035) (134,029) (173.946) (165,174) (173,302) (60.409) (819) 320,154 22.705 34,329 (387,064) (339,120) 4469,306 (36,134) 72.490 4.505,662 469 1,231,745 3,812,041 5,043,786 $ 3.961.852 (35,871) 124.502 (1.956) 4,048 527 (39.682) 999,246 2.822.795 3,812.041 3,020,510 (32,153) 88,378 255 3,076.990 29.848 1,355.219 1.467,576 2.822.795 $ 5 5 S 400,658 599,132 131.069 375,831 113,591 213,313 Interest paid
