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Note 11 - Costs to Obtain and Fulfill a Contract

12 Months Ended

Dec. 31, 2021

11. Costs to obtain and fulfill a contract

(a)	Deferred costs of acquisition

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the period of benefit of those costs to be longer than one year and those costs are expected to be recoverable under the term of the contract. We have identified certain sales incentive programs that meet the requirements to be capitalized, and therefore, capitalized them as contract costs in the amount of $1.1 million at December 31, 2021.

Capitalized contract acquisition costs are amortized into operating expense based on the transfer of goods or services to which the assets relate which typically range from two – ten years. For the year ended December 31, 2021, the Company capitalized $1.1 million and also amortized $0.4 million of contract costs, respectively. The breakdown of the movement in the deferred costs of acquisition balance for the year ended December 31, 2021 is as follows (Dollar amounts in thousands of U.S. dollars):

	*Year ended December 31, 2021*

Balance, beginning of period	$	362
Capitalization of costs		1,086
Amortization of costs		(369	)
Balance, end of period	$	1,079

When the amortization period for costs incurred to obtain a contract with a customer is less than one year, we have elected to apply a practical expedient to expense the costs as incurred. These costs include our internal sales compensation program and certain partner sales incentive programs.

(b)	Deferred costs of fulfillment

Deferred costs to fulfill contracts generally consist of domain registration costs which have been paid to a domain registry, and are capitalized as deferred costs of fulfillment. These costs are deferred and amortized over the life of the domain which generally ranges from one to ten years. To a lesser degree, deferred costs to fulfill contracts also include certain research, design and data migration costs associated with specific professional services contracts. All deferred professional services costs are deferred over the term of the customer contract. For the year ended December 31, 2021, the Company capitalized $173.0 million and also amortized $171.5 million of contract costs. There were no impairment losses recognized in relation to the costs capitalized during the year ended December 31, 2021. Amortization expense is primarily included in cost of revenue. The breakdown of the movement in the deferred costs of fulfillment balance for the year ended December 31, 2021 is as follows (Dollar amounts in thousands of U.S. dollars).

	*Year ended December 31, 2021*

Balance, beginning of period	$	111,066
Deferral of costs		173,018
Recognized costs		(171,464	)
Balance, end of period	$	112,620