Fair Value Measures

9 Months Ended

May 31, 2011

Fair Value Measures

Fair Value Measures

4. FAIR VALUE MEASURES

Pursuant to the accounting guidance for fair value measurements, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the use of various valuation methodologies, including market, income and cost approaches is permissible. The Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability.

(a) Fair Value Hierarchy

The accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value based on the reliability of inputs. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels. FactSet has categorized its cash equivalents and derivatives within the hierarchy as follows:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. These Level 1 assets and liabilities include FactSet's investments in corporate money market funds that are classified as cash equivalents.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. The Company's derivative instruments are classified as Level 2 as they are valued using pricing models that use observable market inputs.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. Certain assets would be classified within Level 3 of the fair value hierarchy because they trade infrequently and, therefore, have little or no transparency. There were no Level 3 assets or liabilities held by FactSet as of May 31, 2011 or August 31, 2010.

(b) Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables shows by level within the fair value hierarchy the Company's assets and liabilities that are measured at fair value on a recurring basis at May 31, 2011 and August 31, 2010 (in thousands):

	Fair Value Measurements at Reporting Date Using
May 31, 2011	Level 1		Level 2		Level 3		Total
Assets
Corporate money market funds	$	180,461	$	0	$	0	$	180,461
Derivative instruments	$	0	$	1,768	$	0	$	1,768
Total assets measured at fair value	$	180,461	$	1,768	$	0	$	182,229
Liabilities
Derivative instruments	$	0	$	0	$	0	$	0
Total liabilities measured at fair value	$	0	$	0	$	0	$	0

	Fair Value Measurements at Reporting Date Using
August 31, 2010	Level 1		Level 2		Level 3		Total
Assets
Corporate money market funds	$	172,218	$	0	$	0	$	172,218
Derivative instruments		0		879		0		879
Total assets measured at fair value	$	172,218	$	879	$	0	$	173,097
Liabilities
Derivative instruments	$	0	$	1,220	$	0	$	1,220
Total liabilities measured at fair value	$	0	$	1,220	$	0	$	1,220

Cash Equivalents

The Company's corporate money market funds are traded in an active market and the net asset value of each fund on the last day of the quarter is used to determine its fair value. As such, the Company's cash equivalents are classified as Level 1.

Derivative Instruments

The Company utilizes the income approach to measure fair value for its derivative instruments (foreign exchange forward contracts). The income approach uses pricing models that rely on market observable inputs such as spot, forward and interest rates, as well as credit default swap spreads and therefore are classified as Level 2.

Assets and liabilities measured at fair value on a recurring basis were presented on the Company's Consolidated Statements of Financial Condition at May 31, 2011 and August 31, 2010 as follows (in thousands):

	Fair Value Measurements at Reporting Date Using
May 31, 2011	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	180,461	$	0	$	0	$	180,461
Other current assets (derivative assets)	$	0	$	1,768	$	0	$	1,768
Total assets measured at fair value	$	180,461	$	1,768	$	0	$	182,229
Accounts payable and accrued liabilities	$	0	$	0	$	0	$	0
Total liabilities measured at fair value	$	0	$	0	$	0	$	0

	Fair Value Measurements at Reporting Date Using
August 31, 2010	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	172,218	$	0	$	0	$	172,218
Other current assets (derivative assets)		0		879		0		879
Total assets measured at fair value	$	172,218	$	879	$	0	$	173,097
Accounts payable and accrued liabilities (derivative liabilities)	$	0	$	1,027	$	0	$	1,027
Deferred rent and other non-current liabilities (derivative liabilities)		0		193		0		193
Total liabilities measured at fair value	$	0	$	1,220	$	0	$	1,220

(c) Assets and Liabilities Measured at Fair Value on a Non-recurring Basis

Certain assets, including goodwill and intangible assets, and liabilities, are measured at fair value on a non-recurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances such as when they are deemed to be other-than-temporarily impaired. The fair values of these non-financial assets and liabilities are determined based on valuation techniques using the best information available, and may include quoted market prices, market comparables, and discounted cash flow projections. An impairment charge is recorded when the cost exceeds its fair value and this condition is determined to be other-than-temporary. During the three and nine months ended May 31, 2011, no fair value adjustments or material fair value measurements were required for the Company's non-financial assets or liabilities.