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Note 4 - Fair Value Measures

9 Months Ended

May. 31, 2015

Disclosure Text Block [Abstract]

Fair Value, Measurement Inputs, Disclosure [Text Block]

4. FAIR VALUE MEASURES

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 for fair value measurements 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, investments and derivatives within the fair value hierarchy as follows:

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 the Company’s corporate money market funds that are classified as cash equivalents.

Level 2 – applies to assets or liabilities for which there are inputs other than quoted prices 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 certificates of deposit and derivative instruments are classified as Level 2.

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. There were no Level 3 assets or liabilities held by the Company as of May 31, 2015 or August 31, 2014.

(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, 2015 and August 31, 2014 (in thousands):

		Fair Value Measurements at Reporting Date Using
May 31, 2015		Level 1				Level 2				Level 3				Total
Assets
Corporate money market funds ⁽¹⁾		$	91,290			$	0			$	0			$	91,290
Certificates of deposit ⁽²⁾			0				25,020				0				25,020
Derivative instruments ⁽³⁾			0				972				0				972
Total assets measured at fair value		$	91,290			$	25,992			$	0			$	117,282

Liabilities
Derivative instruments ⁽³⁾		$	0			$	620			$	0			$	620
Total liabilities measured at fair value		$	0			$	620			$	0			$	620

		Fair Value Measurements at Reporting Date Using
August 31, 2014		Level 1				Level 2				Level 3				Total
Assets
Corporate money market funds ⁽¹⁾		$	75,363			$	0			$	0			$	75,363
Certificates of deposit ⁽²⁾			0				20,008				0				20,008
Derivative instruments ⁽³⁾			0				1,406				0				1,406
Total assets measured at fair value		$	75,363			$	21,414			$	0			$	96,777

Liabilities
Derivative instruments ⁽³⁾		$	0			$	591			$	0			$	591
Total liabilities measured at fair value		$	0			$	591			$	0			$	591

(1)

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 corporate money market funds are classified as Level 1 and included in cash and cash equivalents on the consolidated balance sheet.

(2)

The Company’s certificates of deposit are held to maturity are not debt securities and are classified as Level 2. These certificates of deposit have original maturities greater than three months, but less than one year and, as such, are classified as investments (short-term) on the Company’s consolidated balance sheet.

(3)

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.

The Company did not have any transfers between Level 1 and Level 2 fair value measurements during the periods presented.

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

Certain assets, including goodwill and intangible assets, and liabilities, including long-term debt, 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, based upon the results of such valuations. During the three and nine months ended May 31, 2015, no fair value adjustments were required for the Company’s non-financial assets or liabilities.

As of May 31, 2015, the fair value of the Company’s long-term debt was $35.0 million, which approximated its carrying amount. FactSet did not have any long-term debt as of August 31, 2014. The fair value of the Company’s long-term debt was determined based on quoted market prices for debt with a similar maturity, and thus categorized as Level 2 in the fair value hierarchy.