XML 16 R13.htm IDEA: XBRL DOCUMENT v3.20.1
Derivative Instruments
 6 Months Ended
Feb. 29, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments DERIVATIVE INSTRUMENTS
Cash Flow Hedges 
FactSet conducts business outside the U.S. in several currencies including British Pound Sterling, Euro, Indian Rupee, and Philippine Peso. As such, the Company is exposed to movements in foreign currency exchange rates compared to the U.S. dollar. The Company utilizes derivative instruments (foreign currency forward contracts) to manage the exposures related to the effects of foreign exchange rate fluctuations and reduce the volatility of earnings and cash flows associated with changes in foreign currency. The Company does not enter into foreign currency forward contracts for trading or speculative purposes. Refer to Note 16, Commitments and Contingencies – Concentrations of Credit Risk, for further discussion on counterparty credit risk. 
In designing a specific hedging approach, FactSet considered several factors, including offsetting exposures, the significance of exposures, the forecasting of risk and the potential effectiveness of the hedge. The gains and losses on foreign currency forward contracts offset the variability in operating expenses associated with currency movements. The changes in fair value for these foreign currency forward contracts are initially reported as a component of accumulated other comprehensive loss ("AOCL") and subsequently reclassified into operating expenses when the hedge is settled. There was no discontinuance of cash flow hedges during the first six months of fiscal 2020 or 2019, and as such, no corresponding gains or losses related to changes in the value of the Company’s contracts were reclassified into earnings prior to settlement. 
As of February 29, 2020, FactSet maintained foreign currency forward contracts to hedge a portion of its British Pound Sterling, Euro, Indian Rupee, and Philippine Peso exposures. FactSet entered into a series of forward contracts to mitigate its currency exposure ranging from 25% to 63% over their respective hedged periods. The current foreign currency forward contracts are set to mature at various points between the fourth quarter of fiscal 2020 through the first quarter of fiscal 2021.
The following is a summary of the gross notional values of the derivative instruments: 

(in thousands, in U.S. dollars)
Gross Notional Value
February 29, 2020August 31, 2019
Foreign Currency Forward Contracts$80,277  $113,700  

As of February 29, 2020, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S. dollars was ₱842.6 billion and Rs1,434.3 billion, respectively. The gross notional value of foreign currency forward contracts to purchase U.S. dollars with Euros and British Pound Sterling was €20.5 million and £16.5 million, respectively.
Fair Value of Derivative Instruments
The following is a summary of the fair values of the derivative instruments:

Fair Value of Derivative Instruments
Derivatives designated as hedging instrumentsDerivative AssetsDerivative Liabilities
February 29, 2020August 31, 2019February 29, 2020August 31, 2019
Balance Sheet ClassificationFair ValueFair ValueBalance Sheet ClassificationFair ValueFair Value
Foreign Currency Forward ContractsPrepaid expenses and other current assets  $610  $520  Accounts payable and accrued expenses  $1,181  $3,575  

All derivatives were designated as hedging instruments as of February 29, 2020 and August 31, 2019.
Derivatives in Cash Flow Hedging Relationships
The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the three months ended February 29, 2020 and February 28, 2019, respectively:

(in thousands)(Loss) Gain Recognized in AOCL on Derivatives Location of Loss Reclassified from AOCL into IncomeLoss Reclassified from AOCL into Income
Derivatives in Cash Flow Hedging Relationships2020201920202019
Foreign currency forward contracts$(630) $321  SG&A$(349) $(385) 
The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the six months ended February 29, 2020 and February 28, 2019, respectively:
(in thousands)Gain Recognized in AOCL on Derivatives Location of Loss Reclassified from AOCL into IncomeLoss Reclassified from AOCL into Income
Derivatives in Cash Flow Hedging Relationships2020201920202019
Foreign currency forward contracts$1,402  $2,264  SG&A$(1,082) $(784) 
As of February 29, 2020, the Company assessed that these cash flow hedges were effective. All components of each derivative’s gain or loss were recorded in the Consolidated Statement of Income in Selling, general, and administrative ("SG&A"). As of February 29, 2020, the Company estimates that $0.6 million of net derivative losses related to its cash flow hedges included in AOCL will be reclassified into earnings within the next 12 months.
Offsetting of Derivative Instruments
FactSet’s master netting and other similar arrangements with its respective counterparties allow for net settlement under certain conditions. As of February 29, 2020, and August 31, 2019, there were no material amounts recorded net on the Consolidated Balance Sheets.