What Is Fiscal Year-End?
The term "fiscal year-end" refers to the completion of any one-year or 12-month accounting period other than a typical calendar year. A fiscal year is often the period used for calculating annual financial statements. A company's fiscal year may differ from the calendar year, and may not close on December 31 due to the nature of a company's needs. Once companies choose its fiscal year-end—typically when they are first incorporating or forming their company—it is required to stick with it year to year. This allows accounting data to be consistent in terms of time frames.
Understanding Fiscal Year-End
Every year, public companies are required to publish financial statements for review by the Securities and Exchange Commission (SEC). These documents also give investors an update on company performance compared to previous years and provide analysts with a way to understand business operations. Financial statements are published after each company's fiscal year-end, which may vary from company to company.
- Fiscal year-end refers to the completion of a one-year, or 12-month, accounting period.
- If a company has a fiscal year-end that is the same as the calendar year-end, it means that the fiscal year ends on December 31.
- Companies have the ability to choose the best fiscal year-end for themselves, designed with the needs of the company in mind.
Fiscal Year-End vs. Calendar Year-End
If a company has a fiscal year-end that is the same as the calendar year-end, it means that the fiscal year ends on December 31. However, companies have the ability to choose the best fiscal year-end for themselves, designed with the needs of the company in mind. Companies that operate on a non-calendar business cycle or have a supplier base that does so may choose a fiscal year-end date that more appropriately coincides with their business operations.
For example, many retail companies have a fiscal year that differs from the calendar year due to the heavy sales cycle during the holiday season. Because December 31 coincides with heavy shopping by consumers, a retail firm may have a hard time producing annual financial statements and counting inventories at that same time as manpower and resources are dedicated to the sales floor.
In this case, the firm may choose an alternate fiscal year-end date, such as January 31 rather than December 31. As another example, the best time for a luxury resort to report earnings is probably after vacation season, so it may choose a fiscal year-end of September 30.
Whatever fiscal year-end date is determined, companies must make a decision when they file for incorporation, as their fiscal year-end date cannot be changed every year. It is also important to note that the timing of a company's fiscal year does not change the due date on taxes.
For example, taxes, which are based on a calendar year-end, are still due on April 15, regardless of a company's fiscal year-end. Thus, in many cases, a December 31 fiscal year-end date is more conducive for calculating taxes due.
While many companies have a fiscal year-end on the last day of December, others vary based on the industry of which they are part or some other business needs.
Analysts rely on comparative data to identify trends and create forecasts. As such, analysts must be careful to compare two companies over the same time period. If comparing two companies with different fiscal years, analysts must adjust the data to ensure the information for both firms covers the same time frame so as not to skew the comparison one way or another. This is especially the case for companies that do business in seasonal industries.