Note 11 - Costs to Obtain and Fulfill a Contract

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Capitalized Contract Costs [Text Block]

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

$1.4

 million at

December 31,

2019

.

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,

2019

, the Company capitalized

$0.9

 million and also amortized

$0.9

 million of contract costs, respectively. There was

no

impairment loss recognized in relation to the costs capitalized during the year ended

December 31,

2019

. The breakdown of the movement in the contract costs balance for the year ended

December 31,

2019

is as follows (Dollar amounts in thousands of U.S. dollars):

	Year ended December 31, 2019
Balance, beginning of period	$	1,390
Capitalization of costs		924
Amortization of costs		(914	)
Balance, end of period	$	1,400

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 Prepaid domain name registry and ancillary services fees. These costs are deferred and amortized over the life of the domain which generally ranges from

one

to

ten

years. For the year ended

December 31,

2019

, the Company capitalized

$161.4

 million and also amortized

$169.1

 million of contract costs. We also acquired

$10.3

 million of prepaid domain name registry and ancillary service fees in the Ascio acquisition, which took place on

March 18, 2019.

There was

no

impairment loss recognized in relation to the costs capitalized during the year ended

December 31,

2019

. Amortization expense is primarily included in cost of revenue. The breakdown of the movement in the prepaid domain name registry and ancillary services fees balance for the year ended

December 31,

2019

is as follows (Dollar amounts in thousands of U.S. dollars). 

	Year ended December 31, 2019
Balance, beginning of period	$	106,527
Acquired in a business combination 1		10,318
Deferral of costs		161,385
Recognized costs		(169,063	)
Balance, end of period	$	109,167

1

The Company acquired Ascio on

March 18, 2019.

As part of the transition, the Company acquired active domain name contracts with a terms ranging from

1

-

10

years, for which fees to suppliers were paid in advance.