Fiscal year

Fiscal year

A fiscal year (or financial year, or sometimes budget year) is a period used for calculating annual ("yearly") financial statements in businesses and other organizations. In many jurisdictions, regulatory laws regarding accounting and taxation require such reports once per twelve months, but do not require that the period reported on constitutes a calendar year (i.e., January through December). Fiscal years vary between businesses and countries.

In the United Kingdom, the term fiscal year is sometimes used to refer to the tax year, the year used by statute for tax reporting by individuals, and is not commonly used for accounting years used by companies. The equivalent of fiscal year applied to companies is the accounting reference period (required under the Companies Acts), which usually forms the basis of the accounting period used for tax purposes.

Disparity with the calendar year

Often the fiscal or tax year is specifically established not to match the calendar year (also called natural year) so that accounting year-end work does not coincide with periods of high activity, such as the Christmas shopping rush for retailers, or with holiday periods when employees may prefer to take vacation. If the fiscal year does not coincide with the calendar year, then the calendar year in which the fiscal year ends is used in the shorthand. For example: July 1, 2006 to June 31,2007 would be FY07.

A popular use of a non-calendar year as the fiscal year involves retailers. In many countries, at the end of December, levels of inventory, receivables and payables will be higher than at other month ends and consequently more complex and time-consuming to measure accurately. Therefore, retailers commonly use a month other than December to end their fiscal year. January may be chosen as the last month of the fiscal year because activity levels are likely to be closer to normal by the end of January.

In addition, many companies find that it is convenient for purposes of comparison and for accurate stock taking to always end their fiscal year on the same day of the week, where local legislation permits. Thus some fiscal years will have 52 weeks and others 53. Major corporations that adopt this approach include Cisco Systems and Tesco.

In the United Kingdom, a number of major corporations that were once government owned, such as BT Group and the National Grid, continue to use the government's financial year, which ends on the last day of March, as they have found no reason to change since privatisation.

Nevertheless, for about 65% of publicly traded companies in the United States and for a majority of large corporations in the UK and elsewhere, except in Australia, New Zealand and Japan, the fiscal year and calendar year are identical.

Many universities have a fiscal year which ends during the summer, both to align the fiscal year with the school year, and because the school is normally less busy during the summer months.

Operation in various countries

Such fiscal years are typically numbered using a calendar year and quarter thereof. A fiscal quarter is 3 months (1/4 of a year). For example, the United States government fiscal year for 2009 ("FY09", sometimes written "FY08–09") is as follows:

* 1st Quarter: October 1, 2008December 31, 2008
* 2nd Quarter: January 1, 2009March 31, 2009
* 3rd Quarter: April 1, 2009June 30, 2009
* 4th Quarter: July 1, 2009September 30, 2009

The U.S. government's fiscal year begins on October 1 of the previous calendar year and ends on September 30 of the year with which it is numbered. Prior to 1976, the fiscal year began on July 1 and ended on June 30. The Congressional Budget and Impoundment Control Act of 1974 stipulated the change to allow Congress more time to arrive at a budget each year, and provided for what is known as the "transitional quarter" from July 1, 1976 to September 30, 1976. As stated above, the tax year for a business is governed by the fiscal year it chooses.

The Australian government's fiscal year begins on July 1 and concludes on June 30 of the following year. This applies for personal income tax and the federal budget, and most companies are required to use it as their own.

In Canada, [ [ CIA - The World Factbook - Canada] ] New Zealand, [ [ CIA - The World Factbook - New Zealand] ] India, [ [ CIA - The World Factbook - India] ] Hong Kong, [ [ CIA - The World Factbook - Hong Kong] ] and Japan, [ [ CIA - The World Factbook - Japan] ] the government's financial year runs from April 1 to March 31.

The United Kingdom, [ [ CIA - The World Factbook - United Kingdom] ] the fiscal year runs from April 6 to April 5. United Kingdom corporation tax is charged by reference to the government's financial year, but companies can adopt any year as their accounting year: if there is a change in tax rate, the taxable profit is apportioned to financial years on a time basis.

Japan's income tax year runs from January 1 to December 31, but corporate tax is charged by their own one year period.

In the UK, the tax year (which governs liability to personal income tax and capital gains tax) runs from April 6 to April 5. This reflects the old ecclesiastical calendar, with New Year falling on March 25 ("Lady Day"), the difference being accounted for by the eleven days "missed out" when Great Britain converted from the Julian Calendar to the Gregorian Calendar in 1752 (the British tax authorities, and landlords were unwilling to lose 11 days of tax and rent revenue, so under provision 6 ("Times of Payment of Rents, Annuities, &c.") of the Calendar (New Style) Act 1750, the 1752–3 tax year was extended by 11 days). From 1753 until 1799, the tax year in Great Britain began on 5 April, which was the "old style" new year of 25 March. A 12th skipped Julian leap day in 1800 changed its start to 6 April. It was not changed when a 13th Julian leap day was skipped in 1900, so the tax year in the United Kingdom is still 6 April.

Ireland also used the year ending April 5 until 2001 when it was changed, at the request of Finance Minister Charlie McCreevy, to match the calendar year (the 2001 tax year was nine months, from April to December).

In some jurisdictions, particularly those that permit tax consolidation, companies that are part of a group of businesses must use nearly the same fiscal year (differences of up to three months are permitted in some jurisdictions, such as the U.S. and Japan), with consolidating entries to adjust for transactions between units with different fiscal years, so the same resources will not be counted more than once or not at all.

See also

* 4-4-5 Calendar


*'s [ Financial Glossary]

Wikimedia Foundation. 2010.

Игры ⚽ Нужно сделать НИР?

Look at other dictionaries:

  • fiscal year — n: an accounting period of 12 months Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. fiscal year n. A twelve month period used by a bus …   Law dictionary

  • fiscal year — fiscal years N COUNT: usu sing, usu with supp The fiscal year is the same as the financial year. ...the budget for the coming fiscal year …   English dictionary

  • Fiscal year — Year Year, n. [OE. yer, yeer, [yogh]er, AS. ge[ a]r; akin to OFries. i?r, g?r, D. jaar, OHG. j[=a]r, G. jahr, Icel. [=a]r, Dan. aar, Sw. [*a]r, Goth. j?r, Gr. ? a season of the year, springtime, a part of the day, an hour, ? a year, Zend y[=a]re… …   The Collaborative International Dictionary of English

  • fiscal year — n 1.) the 12 month period used by governments to calculate spending and how much tax a person or business must pay last/current/coming/next fiscal year 2.) AmE the 12 month period over which a company calculates its profits or losses British… …   Dictionary of contemporary English

  • fiscal year — ☆ fiscal year n. a twelve month period between settlements of financial accounts: the U.S. government fiscal year legally ends September 30 …   English World dictionary

  • fiscal year —  Year for accounting purposes, not necessarily beginning in January. The U.S. government’s fiscal year runs from October 1 through September 30 …   American business jargon

  • fiscal year — noun count * a period of twelve months that a business uses to calculate how much profit it has made and how much tax it owes …   Usage of the words and phrases in modern English

  • fiscal year — ( FY) Accounting period covering 12 consecutive months over which a company determines earnings and profits. The fiscal year serves as a period of reference for the company and does not necessarily correspond to the calendar year. Bloomberg… …   Financial and business terms

  • Fiscal Year - FY — A period that a company or government uses for accounting purposes and preparing financial statements. The fiscal year may or may not be the same as a calendar year. For tax purposes, companies can choose to be calendar year taxpayers or fiscal… …   Investment dictionary

  • fiscal year — In the UK, the year beginning on 6 April in one year and ending on 5 April in the next year. The 2005–06 fiscal year therefore runs from 6 April 2005 to 5 April 2006. Income tax, capital gains tax, and annual allowances for inheritance tax are… …   Accounting dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”