What Is Fiscal Year-End?
The term “fiscal year-end” refers to the completion of any one-year or 12-month accounting period other than a typical calendar year. A fiscal year is often the period used for calculating annual financial statements. A company’s fiscal year may differ from the calendar year, and may not close on Dec. 31 due to the nature of a company’s needs.
Once companies choose their fiscal year-end—typically when they are first incorporating or forming their company—it is required to stick with it year to year. This allows accounting data to be consistent in terms of time frames.
- Fiscal year-end refers to the completion of a one-year, or 12-month, accounting period.
- If a company has a fiscal year-end that is the same as the calendar year-end, it means that the fiscal year ends on Dec. 31.
- Companies can choose the best fiscal year-end for themselves, designed with the needs of the company in mind.
Understanding Fiscal Year-End
Every year, public companies are required to publish financial statements for review by the Securities and Exchange Commission (SEC). These documents also give investors an update on company performance compared to previous years and provide analysts with a way to understand business operations. Financial statements are published after each company’s fiscal year-end, which may vary from company to company.
Fiscal Year-End vs. Calendar Year-End
If a company has a fiscal year-end that is the same as the calendar year-end, it means that the fiscal year ends on Dec. 31. However, companies can choose the best fiscal year-end for themselves, designed with the needs of the company in mind.
Companies that operate on a non-calendar business cycle or have a supplier base that does so may choose a fiscal year-end date that more appropriately coincides with their business operations.
For example, many retail companies have a fiscal year that differs from the calendar year due to the heavy sales cycle during the holiday season. Because Dec. 31 coincides with heavy shopping by consumers, a retail firm may have a hard time producing annual financial statements and counting inventories at that same time as manpower and resources are dedicated to the sales floor.
In this case, the firm may choose an alternate fiscal year-end date, such as Jan. 31 rather than Dec. 31. As another example, the best time for a luxury resort to report earnings is probably after vacation season, so it may choose a fiscal year-end of Sept. 30.
Whatever fiscal year-end date is determined, companies must make a decision when they file for incorporation, as their fiscal year-end date cannot be changed every year. It is also important to note that the timing of a company’s fiscal year does not change the due date on taxes.
For example, taxes, which are based on a calendar year-end, are still often due on April 15, regardless of a company’s fiscal year-end. Thus, in many cases, a Dec. 31 fiscal year-end date is more conducive for calculating taxes due.
What Is the U.S. Fiscal Year-End?
The fiscal year of the U.S. government runs from Oct. 1 to Sept. 30. It is not the same as a calendar year.
What Happens at the End of a Fiscal Year?
At the end of a fiscal year, a company reviews its entire annual bookkeeping. It reconciles transactions, makes adjustments, verifies financial data, and calculates all of the annual financial information, such as income, expenses, revenue, investments, and more.
How Do Companies Choose Their Fiscal Year End?
Most companies choose their fiscal year-end based on the seasonality of their business. Some businesses are seasonal while others transact the same amount of business throughout the year. Businesses generally choose their fiscal year based on the period when they receive the most profit. For example, a business that earns most of its profit after the Christmas holiday season may choose to end its fiscal year right after.
The Bottom Line
The fiscal year-end of a company is the completion of a one-year accounting cycle of the business. It contains four quarters and usually runs from Jan. 1 to Dec. 31. Some businesses have fiscal years that do not line up with a traditional calendar year.
As analysts rely on comparative data to identify trends and create forecasts, they must be careful to compare two companies over the same time period.
If comparing two companies with different fiscal years, analysts must adjust the data to ensure the information for both firms covers the same time frame so as not to skew the comparison one way or another. This is especially the case for companies that do business in seasonal industries.