A fiscal year is a 12-month period that an organization uses to report its finances. It could be a 12-month period of time or a 52/53-week period of time. When an organization’s fiscal year ends outside of the CPAs’ busy season, the organization may be able to negotiate a lower auditing fee.
Examples of Fiscal Year
- 12 months of February 1 to January 31
- 52 weeks ending on the Saturday closest to January 31.
- 12 months of October 1 – September 30
- 12 months of June 1-May 31
Thus, It is a one-year period chosen by a company to report its financial information. Financial reports, external audits, and federal tax filings are based on a company’s financial year. Companies may choose to report their financial information on a non-calendar fiscal year based on the specific nature and revenue cycle of that business.
Although It can start on January 1st and end on December 31st, not all fiscal years correspond with the calendar year. For example, universities often begin and end their financial years according to the school year.
It is very important to publicly traded corporations and their investors since it is the period over which revenue and earnings are measured, making year-to-year comparisons possible. For tax purposes, the Internal Revenue Service (IRS) allows companies to be either calendar-year taxpayers or fiscal-year taxpayers.
School districts typically have fiscal years of July 1 through June 30 to coincide with their natural business years. Large retailers often end their fiscal years on the Saturday closest to January 31 to include sales returns from its peak December sales. The retailers’ interim periods will be 13-week “quarters” consisting of one 5-week “month” plus two 4-week “months”. This allows for better comparisons between years.