fiscal year
/ FISS-kul /
A business cannot wait until it shuts down to find out whether it succeeded — owners, lenders, and tax authorities want a verdict every year. So companies slice time into yearly chunks and report on each. A fiscal year is the twelve-month period a business chooses for its annual accounting and reporting; it need not match the January-to-December calendar year.
Many firms do run their fiscal year as the calendar year, ending December 31. But a business is free to end its year whenever suits its operations — a retailer might end on January 31, after the holiday rush settles, while a school district ends in summer. Whatever the choice, the fiscal year defines the period whose revenues and expenses are gathered into one income statement, with a balance sheet drawn at its close. A '52/53-week' fiscal year (always ending on, say, the last Saturday of a month) is a common variant.
Choosing a sensible fiscal year-end matters because it sets a natural low point in business activity, making counting inventory and closing the books easier and the results more meaningful. Note the difference from a tax year, which is the period a tax authority requires you to report on; a company's fiscal year and its tax year often coincide but are defined by different rules and can differ.
A ski-equipment shop ends its fiscal year on May 31, when stores are nearly empty and the slow season makes it easy to count remaining stock and close the books — even though most companies in town end on December 31.
A fiscal year-end chosen at the natural low point of the business.
A fiscal year need not be the calendar year, and it is not automatically the same as a company's tax year — the two are set by different rules and can differ.