The fiscal year is a one-year period used by governments, companies, charities, and organizations in which they do their budgeting and financial reporting. It’s the most commonly-used time for an enterprise to prepare its financial statements, such as its Annual Report and tax returns.
If we’re talking about corporations listed on the stock market, then a fiscal year is critical to its investors because it allows them to look at the company’s profits, earnings, revenue, and then compare it to previous years.
When does the fiscal year begin and end?
It depends on the country and even sometimes, the business. The fiscal year can start on January 1st and end on December 31st, but not always. Some organizations begin and end differently—such as schools, which use the school year to determine their fiscal year. Universities are the same.
For different countries’ federal governments, the fiscal years are as follows:
- USA: October 1st – September 30th
- Canada: April 1st – March 31st
- United Kingdom: April 6th – April 5th
- Australia: July 1st – June 30th
- France: January 1st – December 31st
Just as a few examples.
What about the Internal Revenue Service?
To register and pay tax, the IRS permits some flexibility here for companies. They allow them to either pay tax at the actual calendar year-end or the company’s own fiscal year-end.
So how is a fiscal year referred to?
The fiscal year is often referenced to as FY. When a company references its FY, the fiscal year is considered to be the year on which the closing date falls. In other words, imagine a company with a fiscal year that starts 1 April 2019 and ends 31 March 2020. The fiscal year will be 2020, even though it begins in 2019.
The fiscal year can also be referred to as the financial year.
How do most companies mark their fiscal year?
Big corporations tend to go with the April to March fiscal year model, but smaller companies and individuals will often just use the usual calendar year as their fiscal year. When deciding on your own fiscal year, it’s best to consult a financial professional for guidance and best practices in your local area.