NetFlix 2014 Annual Report Download - page 69

Table of Contents
The Company classifies unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as “Other
non-current liabilities” in the Consolidated Balance Sheets. As of December 31, 2014 , the total amount of gross unrecognized tax benefits was
$34.8 million , of which $29.2 million , if recognized, would favorably impact the Company’s effective tax rate. The aggregate changes in the
Company’s total gross amount of unrecognized tax benefits are summarized as follows (in thousands):
The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of
December 31, 2014 and December 31, 2013 , the total amount of gross interest and penalties accrued was $0.4 million and $3.9 million ,
respectively, which is classified as “Other non-current liabilities” in the Consolidated Balance Sheets. Interest and penalties included in the
Company's provision for income taxes were not material in all the periods presented.
The Company files U.S. federal, state and foreign tax returns. The Company is currently under examination by the IRS for the years 2010
through 2013. The IRS had previously completed its Field Exam of the 2008 and 2009 federal tax returns and issued a Revenue Agents Report
with a proposed assessment primarily related to the Company's R&D Credits claimed in those years. The Company filed a protest against the
proposed assessment and settlement was reached with the IRS Appeals Division in December 2014. As a result, the Company reassessed the
tax reserves for all open years and released $38.6 million
of tax reserves in the fourth quarter of 2014. The IRS Field Exam of the 2010 through
2013 federal tax returns is in progress.
The Company is also currently under examination by the state of California for the years 2006 and 2007. California has completed its
Field Exam of the 2006 and 2007 California tax returns and has issued a Notice of Proposed Assessment primarily related to the Company's
R&D Credits claimed in those years. The Company has filed a protest against the proposed assessment and is currently awaiting the
commencement of the Protest process with the Franchise Tax Board. The years 1997 through 2005, as well as 2008 through 2013, remain
subject to examination by the state of California.
The Company is currently not under examination in any foreign jurisdiction. The years 2011 through 2013 remain subject to examination
by foreign jurisdictions.
Given the potential outcome of the current examinations as well as the impact of the current examinations on the potential expiration of
the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could significantly change within the next
twelve months. However, at this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits
cannot be made.
The Company maintains a 401(k) savings plan covering substantially all of its employees. Eligible employees may contribute up to 60%
of their annual salary through payroll deductions, but not more than the statutory limits set by the Internal Revenue Service. The Company
matches employee contributions at the discretion of the Board. During 2014 , 2013 and 2012 , the Company’s matching contributions totaled
$8.3 million , $6.5 million and $5.2 million , respectively.
Beginning in the fourth quarter of 2011, the Company has three reportable segments: Domestic streaming, International streaming and
Domestic DVD. Segment information is presented along the same lines that the Company’s chief operating decision maker reviews the
operating results in assessing performance and allocating resources. The Company’s chief operating decision maker reviews revenue and
contribution profit for each of the reportable segments. Contribution profit (loss) is defined as revenues less cost of revenues and marketing
expenses directly incurred by the segment. The Company has aggregated the results of the International operating segments into one reportable
segment because these operating segments share similar long term economic and other qualitative characteristics.
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Balance as of December 31, 2012
$
43,337
Increases related to tax positions taken during prior periods
4
Decreases related to tax positions taken during prior periods
(25
)
Increases related to tax positions taken during the current period
24,915
Balance as of December 31, 2013
$
68,231
Decreases related to tax positions taken during prior periods
(39,015
)
Increases related to tax positions taken during the current period
11,174
Decreases related to settlements with taxing authorities
(5,578
)
Balance as of December 31, 2014
$
34,812
11.
Employee Benefit Plan
12.
Segment Information