NetFlix 2013 Annual Report Download - page 58

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amortization period is extended by a year. Current estimates of viewing patterns indicate that viewing in the first
few months is significantly higher, relative to the remaining amortization period, than previously estimated. As a
result, in the third quarter of 2013, the Company began amortizing this type of content on an accelerated basis over
the amortization period. The effect of this change in estimate was an $18.9 million decrease in contribution profit
for the Domestic streaming segment and a $6.1 million increase in contribution loss for the International streaming
segment for the year ended December 31, 2013. The effect of this change in estimate was a decrease in operating
income and net income of $25.0 million and $15.4 million, respectively for the year ended December 31, 2013. The
effect to basic earnings per share and diluted earnings per share was a decrease of $0.27 and $0.25, respectively, for
the year ended December 31, 2013. The effect of this change in estimate relates primarily to titles that first
premiered on Netflix in the first and second quarters of 2013.
3. Short-term Investments
The Company’s investment policy is consistent with the definition of available-for-sale securities. The
Company does not buy and hold securities principally for the purpose of selling them in the near future. The
Company’s policy is focused on the preservation of capital, liquidity and return. From time to time, the Company
may sell certain securities but the objectives are generally not to generate profits on short-term differences in
price. The following tables summarize, by major security type, the Company’s assets that are measured at fair
value on a recurring basis and are categorized using the fair value hierarchy.
December 31, 2013
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
(in thousands)
Cash .................................. $ 483,959 $ — $ — $ 483,959
Level 1 securities:
Money market funds ................. 126,208 — — 126,208
Level 2 securities:
Corporate debt securities .............. 316,465 1,245 (654) 317,056
Government securities ................ 143,812 287 (18) 144,081
Asset and mortgage-backed securities . . . 93,118 229 (418) 92,929
Certificate of deposits ................ 23,425 — — 23,425
Agency securities ................... 17,951 — (2) 17,949
Total (1) ............................... $1,204,938 $1,761 $(1,092) $1,205,607
December 31, 2012
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
(in thousands)
Cash .................................. $ 284,661 $ — $ — $ 284,661
Level 1 securities:
Money market funds ................. 10,500 — — 10,500
Level 2 securities:
Corporate debt securities .............. 150,322 1,605 (32) 151,895
Government securities ................ 166,643 285 — 166,928
Asset and mortgage-backed securities . . . 138,340 750 (125) 138,965
Total (2) ............................... $ 750,466 $2,640 $ (157) $ 752,949
(1) Includes $605.0 million that is included in cash and cash equivalents, $595.4 million included in short-term
investments and $5.2 million of restricted cash that is included in other non-current assets related to workers
compensation deposits.
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