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Note 11 - Costs to Obtain and Fulfill a Contract

12 Months Ended

Dec. 31, 2022

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 and other customer acquisition fees that meet the requirements to be capitalized, and therefore, capitalized them as contract costs in the amount of $1.8 million at December 31, 2022.

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, 2022, the Company capitalized $1.5 million and also amortized $0.7 million of contract costs, respectively. The breakdown of the movement in the deferred costs of acquisition balance for the year ended December 31, 2022 is as follows (Dollar amounts in thousands of U.S. dollars):

	*Year ended December 31, 2022*

Balance, beginning of period	$	1,079
Capitalization of costs		1,494
Amortization of costs		(746	)
Balance, end of period	$	1,827

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, certain partner sales incentive programs and other customer acquisition fees.

(b)	Deferred costs of fulfillment

Deferred costs to fulfill contracts primarily 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. The Company also defers certain technology design and data migration costs it incurs to fulfil its performance obligations contained in our platform services arrangements. For the year ended December 31, 2022, the Company capitalized $169.5 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, 2022. 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, 2022 is as follows (Dollar amounts in thousands of U.S. dollars).

	*Year ended December 31, 2022*

Balance, beginning of period	$	112,711
Deferral of costs		169,457
Recognized costs		(171,494	)
Balance, end of period	$	110,674