What is a Fiscal year (FY)?
A fiscal year, or financial year, is a period that a company, government, or organization uses for calculating and reporting annual financial statements.
Th regulatory laws of most jurisdictions concerning accounting and taxation require that these reports are filed every twelve or twenty-four months.
In accounting, the fiscal year is often different from the calendar year (January to December). When it is the same it is called a Calendar Fiscal Year.
Seasonal businesses, such as retailers, usually have non-calendar fiscal years.
Financial years vary according to each individual business, country, and organization. However, around 60% of publicly listed companies in the US and the UK use the calendar year as their fiscal year.
Most businesses whose activities are very seasonal tend to have fiscal years that don’t start in January and end in December.
For example, a company might decide to start their fiscal year on October 1 – if most of their income is generated in autumn (US: fall).
Many retailers record a major percentage of their sales over the Christmas season. If they used the Calendar Fiscal Year, the results would not tell us whether they had a good Christmas season one year and a bad one next (Christmas retail season carries on into January). If their fiscal year is from July 1 to June 30, the whole Christmas season will be included in each report, rather than half of one and half of the other.
In the past, fiscal year and financial year had slightly different meanings in the native English-speaking nations. Today, in the vast majority of cases, both terms can be used interchangeably.
According to merriam-webster.com, the fiscal year is:
“A 12-month period used by a government, business, or organization to calculate how much money is being earned, spent, etc.”
Fiscal year in the US:
The fiscal year for the United States federal government is the 12-month period that begins on October 1 and ends on 30 September the year after. This gives elected Congressmen enough time to participate in the budget process for the next year. The IRS system’s fiscal year is the same as the calendar year.
Fiscal year in the UK:
In the UK, the fiscal year begins on 1 April and ends on 31 March of the following year for corporation tax purposes and government financial statements. For people who are self-employed and for those who pay personal tax the fiscal year starts on 6 April and ends on 5 April of the following year.