Fiscal Year (or financial year, or accounting year) is defined as the period of time that a company uses to measure its financial performance. A company’s fiscal year is usually based on its accounting cycle, which is the time period used to calculate its financial statements. For example, a company with a June 30 fiscal year-end would report its fiscal year results for the period of July 1 to June 30. The calendar year starts in January and ends in December, while a fiscal year can start and end in any month.
Different Fiscal Years in Different Areas
In Europe, the fiscal year for many countries starts on January 1 and ends on December 31.
The Australian government’s fiscal year starts on July 1 and ends on June 30.
Canada starts on April 1 and ends on March 31.
The United Kingdom’s tax year starts on April 6 and ends on April 5.
In the United States, the federal government’s fiscal year starts on October 1 and ends on September 30.
Benefits of Using Fiscal Year
There are a lot of benefits of Fiscal Year. Here are some of them:
- It can align the company’s reporting period with its business cycle. This is often the case for companies that have seasonal businesses, such as retailers that do most of their business during the holiday season.
- It can give the company more time to prepare its financial statements. This can be helpful if the company’s accounting cycle is complex or if it needs more time to gather all the necessary information.
- It can help the company save on taxes. For example, a company with a December 31 fiscal year-end can defer income taxes by one month by reporting its income in the following calendar year.
Fiscal Year For Accountants
The fiscal year is also a key concept in accounting, where it defines the period of time that is covered by a company’s financial statements. The most common accounting method used in the United States is the accrual basis of accounting, which recognizes income and expenses when they are earned or incurred, regardless of when the cash is actually received or paid
Fiscal Year and Strategic Finance
The fiscal year is often used as a planning horizon in business strategy formation, due to its wide adoption. In particular, many businesses put significant emphasis on their annual budgeting process, which typically coincides with the establishment of the company’s fiscal year.