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Derivative Instruments
 12 Months Ended
Aug. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments DERIVATIVE INSTRUMENTS
Cash Flow Hedges
Foreign Currency Forward Contracts
FactSet conducts business outside the U.S. in several currencies including the 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 19, Risks and 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 AOCL and subsequently reclassified into operating expenses when the hedge is settled. There was no discontinuance of cash flow hedges during 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 August 31, 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 75% over their respective hedged periods. The current foreign currency forward contracts are set to mature at various points between the first quarter of fiscal 2021 through the fourth quarter of fiscal 2021.
As of August 31, 2020, the gross notional value of foreign currency forward contracts to purchase Philippine Pesos and Indian Rupees with U.S. dollars was ₱1.3 billion and Rs1.4 billion, respectively. The gross notional value of foreign currency forward contracts to purchase U.S. dollars with Euros and British Pound Sterling was €31.8 million and £36.4 million, respectively.
Interest Rate Swap Agreement
On March 5, 2020, FactSet entered into an interest rate swap agreement with a notional amount of $287.5 million to hedge the variable interest rate obligation on a portion of its outstanding debt under its 2019 Revolving Credit Facility (as defined in Note 12, Debt). As of August 31, 2020, FactSet has borrowed $575.0 million of the available $750.0 million under the 2019 Revolving Credit Facility, which bears interest on the outstanding principal amount at a rate equal to a contractual one month LIBOR plus a spread using a debt leverage pricing grid, which was 0.875% as of August 31, 2020. The variable interest rate on FactSet’s long-term debt can expose the Company to interest rate volatility arising from changes in LIBOR. Under the terms of the interest rate swap agreement, FactSet will pay interest at a fixed rate of 0.7995% and receive variable interest payments based on the same one-month LIBOR utilized to calculate the interest expense from the 2019 Revolving Credit Facility. The interest rate swap agreement matures on March 29, 2024. Refer to Note 12, Debt, for further discussion on the 2019 Revolving Credit Facility.
As the terms for the interest rate swap agreement align with the 2019 Revolving Credit Facility, the Company does not expect any hedge ineffectiveness. The Company has designated and accounted for this instrument as a cash flow hedge with the unrealized gains or losses on the interest rate swap agreement recorded in AOCL in the Consolidated Balance Sheets.
The following is a summary of the gross notional values of the derivative instruments:


(in thousands, in U.S. dollars)
Gross Notional Value
August 31, 2020
August 31, 2019
Foreign currency forward contracts$129,649 $113,700 
Interest rate swap agreement287,500 — 
Total cash flow hedges$417,149 $113,700 
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
August 31,August 31,
2020201920202019
Balance Sheet ClassificationFair ValueFair ValueBalance Sheet ClassificationFair ValueFair Value
Foreign currency forward contractsPrepaid expenses and other current assets$3,644 $520 Accounts payable and accrued expenses$93 $3,575 
Interest rate swap agreementPrepaid expenses and other current assets— — Accounts payable and accrued expenses1,861 — 
Other assets— — Other non-current liabilities3,819 — 
Total cash flow hedges$3,644 $520 $5,773 $3,575 

All derivatives were designated as hedging instruments as of August 31, 2020 and 2019, respectively.
Derivatives in Cash Flow Hedging Relationships
The following table provides the pre-tax effect of derivative instruments in cash flow hedging relationships for the each of the three fiscal years ended August 31, 2020, 2019 and 2018:

(in thousands)
Gain (Loss) Recognized
in AOCL on Derivatives
(Effective Portion)
Location of (Loss) Gain Reclassified
from AOCL
into Income
(Effective Portion)
(Loss) Gain Reclassified
from AOCL into Income
(Effective Portion)
Derivatives in Cash Flow Hedging Relationships
202020192018202020192018
Foreign currency forward contracts$5,049 $(187)$(7,700)SG&A$(1,556)$(1,794)$3,106 
Interest rate swap agreement$(6,138)$— $— Interest expense, net$(458)$— $— 
Total cash flow hedges$(1,089)$(187)$(7,700)$(2,014)$(1,794)$3,106 
As of August 31, 2020, the Company assessed that these cash flow hedges were effective. Foreign currency forward contract gains and losses are recorded in the Consolidated Statement of Income in Selling, general, and administrative ("SG&A"). The gain or loss from the interest rate swap agreement is recorded in the Consolidated Statement of Income in Interest expense, net.
As of August 31, 2020, the Company estimates that net pre-tax derivative gains of $1.7 million included in AOCL will be reclassified into earnings within the next 12 months. No amount of ineffectiveness was recorded in the Consolidated Statements of Income for these designated cash flow hedges and all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
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 August 31, 2020 and 2019, there were no material amounts recorded net on the Consolidated Balance Sheets.