NetFlix 2015 Annual Report Download - page 70

The Company classified $3.6 million of unrecognized tax benefits that are expected to result in payment or
receipt of cash within one year as “Accrued expenses”. The unrecognized tax benefits that are not expected to
result in payment or receipt of cash within one year are classified as “Other non-current liabilities” and a
reduction of deferred tax assets which is classified as “Other non-current assets” in the Consolidated Balance
Sheets. As of December 31, 2015, the total amount of gross unrecognized tax benefits was $17.1 million, of
which $13.5 million, if recognized, would favorably impact the Company’s effective tax rate. 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):
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
Increases related to tax positions taken during prior periods ..................... 1,960
Decreases related to tax positions taken during prior periods .................... (12,334)
Increases related to tax positions taken during the current period ................. 7,077
Decreases related to settlements with taxing authorities ........................ (14,398)
Balance as of December 31, 2015 .............................................. $17,117
The Company includes interest and penalties related to unrecognized tax benefits within the provision for
income taxes and in “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. In December 2015, the Company reached a
settlement with the IRS for tax years 2010 through 2013. The 2014 Federal tax return remains subject to
examination by the IRS. California had previously completed its Field Exam of the 2006 and 2007 California tax
returns and had issued a Notice of 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 Franchise Tax Board for tax years 1997 through 2007 in November 2015. The years 2008 through 2014,
remain subject to examination by the state of California. As a result of the above audit settlements, the Company
has reassessed the tax reserves on the related uncertain tax position for all open years and released $13.4 million
of tax reserves in the fourth quarter of 2015. The Company has no significant foreign jurisdiction audits
underway. The years 2011 through 2014 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, an estimate of the range of
reasonably possible adjustments cannot be made.
11. Employee Benefit Plan
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 2015, 2014 and 2013, the Company’s matching contributions totaled $11.2
million, $8.3 million and $6.5 million , respectively.
12. Segment Information
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
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