Note 2. Revenue and Recognition

Contract Balances from Contracts with Clients

The timing of revenue recognition, billing and cash collection results in billed receivables, unbilled receivables and deferred revenue on the consolidated balance sheet.

When fees are received prior to transferring services to the client under the terms of a contract, deferred revenue, which is a contract liability, is recorded. Contract liabilities are recognized as revenue when services are performed and all other revenue recognition criteria have been met.

In certain instances, the Company delivers services in advance of billing. In this case the Company recognizes unbilled receivables which is not a contract asset as the Company has an unconditional right for payment.

For the year ended December 31, 2022, the Company recognized $3.7 million in revenue from amounts that were included in deferred revenue as of December 31, 2021.

Remaining Performance Obligations

The Company has performance obligations associated with certain clients' contracts for future services that have not yet been recognized as revenue. As of December 31, 2023, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied, including deferred revenue, was approximately $16.5 million. Of the total remaining performance obligations, the Company expects to recognize approximately 55.4% within a year and 44.6% over the next two to five years thereafter. Actual amounts and timing of revenue recognized may differ due to subsequent contract modifications, renewals and/or terminations.

Contract Costs

Incremental costs for obtaining contracts that are deemed recoverable are capitalized as contract costs and are included in other assets in the consolidated balance sheets. Such costs result from the payment of sales incentives and totaled $3.5 million, $4.0 million and $0.4 million as of December 31, 2023, 2022 and 2021, respectively. Capitalized sales incentives are amortized over the period of benefits, which the Company has determined to be three years. The amortization is included in selling and marketing expense line in the consolidated statements of operations and comprehensive loss, and totaled $1.2 million, $0.4 million and less than $0.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Costs to fulfill a contract are capitalized when they relate directly to an existing contract or specific anticipated contract, generate or enhance resources that will be used to fulfill performance obligations and are recoverable. Such costs primarily represent set-up and implementation costs, which include any direct cost incurred at inception of a contract. The Company capitalized $2.3 million, $2.0 million and $1.4 million of costs in 2023, 2022 and 2021, respectively within other assets on the consolidated balance sheets. These capitalized costs are amortized on a straight-line basis over the expected contract life, which generally is five years, starting on go-live date. The amortization is included in technology and development expense line in the consolidated statements of operations and comprehensive loss, and totaled $0.6 million, $1.8 million and $0.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Included in the amortization expense for the year ended December 31, 2022 is $1.5 million resulting from the impairment of customer set-up costs associated with technology integration. There was no impairment of capitalized contract costs during the years ended December 31, 2023 and 2021.