Option Grant and Exercise Terms

Table of Contents The Company did not recognize certain tax benefits from uncertain tax positions within the provision for income taxes. The Company may recognize a tax benefit only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. See Note 10 Income Taxes to the consolidated financial statements for further information regarding income taxes. Foreign Currency The functional currency for the Company's subsidiaries is determined based on the primary economic environment in which the subsidiary operates. The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenues and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in cumulative translation adjustment included in "Accumulated other comprehensive income (loss)" in Stockholders' equity on the Consolidated Balance Sheets. The Company remeasures monetary assets and liabilities that are not denominated in the functional currency at exchange rates in effect at the end of each period. Gains and losses from these remeasurements are recognized in interest and other income (expense). Foreign currency transactions resulted in a gain of $403 million, a loss of $660 million, and a gain of $7 million for the years ended December 31, 2021, 2020 and 2019, respectively. These gains and losses were primarily due to the non-cash remeasurement of our Senior Notes denominated in euros and the remeasurement of cash and content liability positions denominated in currencies other than functional currencies. Stock-Based Compensation The Company grants fully vested non-qualified stock options to its employees on a monthly basis. As a result of immediate vesting, stock-based compensation expense is fully recognized on the grant date, and no estimate is required for post-vesting option forfeitures. See Note 9 Stockholders' Equity to the consolidated financial statements for further information regarding stock-based compensation. 2.Revenue Recognition The Company's primary source of revenues is from monthly membership fees. Members are billed in advance of the start of their monthly membership and revenues are recognized ratably over each monthly membership period. Revenues are presented net of the taxes that are collected from members and remitted to governmental authorities. The Company is the principal in all its relationships where partners, including CE manufacturers, MVPDs, mobile operators and ISPs, provide access to the service as the Company retains control over service delivery to its members. Typically, payments made to the partners, such as for marketing, are expensed. However, if there is no distinct service provided in exchange for the payments made to the partners or if the price that the member pays is established by the partners and there is no standalone price for the Netflix service (for instance, in a bundle), these payments are recognized as a reduction of revenues. The following tables summarize streaming revenues, paid net membership additions, and ending paid memberships by region for the years December 31, 2021, 2020 and 2019, respectively: United States and Canada (UCAN) Revenues Paid net membership additions Paid memberships at end of period $ 2021 46 46 As of Year Ended December 31, 2020 (in thousands) 12,972,100 1,279 $ 75,215 11,455,396 6,274 $ 73,936 2019 10,051,208 2,905 67,662

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