. COMMITMENTS AND CONTINGENCIES

Commitments represent obligations, such as those for future purchases of goods or services that are

not

yet recorded on the balance sheet as liabilities. FactSet records liabilities for commitments when incurred (

i.e.

, when the goods or services are received).

Lease Commitments

November 30, 2017,

the Company leased approximately

202,000

square feet of office space at its headquarters in Norwalk, Connecticut. Including new lease agreements executed during fiscal

2018,

the Company’s worldwide leased office space increased to approximately

1,612,100

square feet at

November 30, 2017,

469,100

square feet, or

41.0%,

from

August 31, 2017.

This increase was primarily due to new leases for additional office space in the Philippines. The Company’s significant locations are listed under Item

Properties

, within the Annual Report on Form

-K for the fiscal year ended

August 31, 2017.

The non-cancelable operating leases expire on various dates through

2031.

The Company believes the amount of leased office space as of

November 30, 2017

is adequate for its current needs and that additional space is available for lease to meet any future needs.

Total minimum rental payments associated with the leases are recorded as rent expense (a component of

SG&A

expense) on a straight-line basis over the periods of the respective non-cancelable lease terms. Future minimum commitments for the Company’s operating leases in place as of

November 30, 2017

are as follows:

Years ended August 31, (in thousands)	Minimum Lease Payments
2018 (remaining nine months)	$	29,729
2019		36,729
2020		28,669
2021		21,558
2022		20,858
Thereafter		144,761
Total	$	282,304

Rent expense (including operating costs) for al

l operating leases amounted to

$13.0

million and

$11.4

million during the

three

months ended

November 30, 2017

and

2016,

respectively. At

November 30, 2017

and

August 31, 2017,

deferred rent reported within the Consolidated Balance Sheets totaled

$37.3

million and

$37.4

million, of which

$33.2

million and

$33.5

million, respectively, was reported as a non-current liability within the line item Deferred Rent and Other Non-Current Liabilities

Approximately

$1.9

million of standby letters of credit have been issued during the ordinary course of business in connection with the Company’s current leased office space as of

November 30, 2017.

These standby letters of credit contain covenants that, among other things, require FactSet to maintain minimum levels of consolidated net worth and certain leverage and fixed charge ratios. As of

November 30, 2017,

FactSet was in material compliance with all covenants contained in the standby letters of credit.

Purchase Commitments with Suppliers

Purchase obligations represent payments due in future periods in respect of commitments to the Company

’s various data vendors as well as commitments to purchase goods and services such as telecommunication and computer maintenance services. These purchase commitments are agreements that are enforceable and legally binding on FactSet and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. As of

August 31, 2017,

the Company had total purchase commitments with suppliers of

$81.0

million. There were

material changes in the Company’s purchase commitments during the

first

three

months of fiscal

2018.

Contingencies

Income Taxes

Uncertain income tax positions are accounted for in accordance with applicable accounting guidance (see Note

). FactSet is currently under audit by tax authorities and has reserved for potential adjustments to its provision for income taxes that

may

result from examinations by, or any negotiated settlements with, these tax authorities. The Company believes that the final outcome of these examinations or settlements will

not

have a material effect on its results of operations. If events occur which indicate payment of these amounts is unnecessary, the reversal of the liabilities would result in the recognition of tax benefits in the period FactSet determines the liabilities are

longer necessary. If the Company’s estimates of the federal, state, and foreign income tax liabilities are less than the ultimate assessment, a further charge to expense would result.

Legal Matters

FactSet accrues non income-tax liabilities for contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. The Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business, including intellectual property litigation. Based on information available at

November 30, 2017,

FactSet’s management does

not

believe that the ultimate outcome of these unresolved matters against the Company, individually or in the aggregate, is likely to have a material adverse effect on the Company's consolidated financial position, its results of operations or its cash flows.

Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, FactSet has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was serving, at FactSet

’s request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in, or

not

opposed to, the best interests of the Company, and with respect to any criminal action or proceeding, had

reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments FactSet could be required to make under these indemnification obligations is unlimited; however, FactSet has a director and officer insurance policy that it believes mitigates FactSet's exposure and

may

enable FactSet to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification obligations is immaterial.

Concentrations of Credit Risk

Cash equivalents

Cash and cash equivalents are maintained

primarily with

five

financial institutions. Deposits held with banks

may

exceed the amount of insurance provided on such deposits. These deposits

may

be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeks to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties.

Accounts Receivable

Accounts receivable are unsecured and derived from revenues earned from clients located around the globe. FactSet

does

not

require collateral from its clients but performs credit evaluations on an ongoing basis. The Company maintains reserves for potential write-offs and evaluates the adequacy of the reserves periodically. These losses have historically been within expectations.

single client represented

10%

or more of FactSet’s total revenues in any period presented. At

November 30, 2017,

the Company’s largest individual client accounted for

of total annual subscriptions and subscriptions from the

ten

largest clients did

not

surpass

20%

of total annual subscriptions, slightly higher than the percentages as of

August 31, 2017.

As of

November 30, 2017,

the receivable reserve was

$2.9

million compared to a reserve of

$2.7

million as of

August 31, 2017

Derivative Instruments

As a result of the use of derivative instruments, the Company is exposed to counterparty credit risk. FactSet has incorporated counterparty risk into the fair value of its derivative assets and its own credit risk into the value of the Company

’s derivative liabilities, when applicable. FactSet calculates credit risk from observable data related to CDS as quoted by publicly available information. Counterparty risk is represented by CDS spreads related to the senior secured debt of the respective bank with whom FactSet has executed these derivative transactions. Because CDS spread information is

not

available for FactSet, the Company’s credit risk is determined based on using a simple average of CDS spreads for peer companies as determined by FactSet. To mitigate counterparty credit risk, FactSet enters into contracts with large financial institutions and regularly reviews credit exposure balances as well as the creditworthiness of the counterparties.