A fiscal year is a company's or organization's financial year used for accounting, budget planning, reporting, and taxation purposes. Unlike the calendar year that runs from January 1st to December 31st, a fiscal year can start and end on any date, as long as it covers a continuous 12-month period.
Organizations typically select a fiscal year period that aligns with their business cycles. For example, retail companies often use fiscal calendars ending in January, following peak holiday sales to ensure their financial statements accurately reflect annual sales performance. Governments, nonprofit entities, and educational institutions often adopt fiscal years starting in July or October to coordinate budget planning effectively.
Selecting a specific fiscal year can streamline financial processes and facilitate more accurate reporting of income and expenditures. Consistency in fiscal year choice across an industry can also make it easier for investors, regulators, and analysts to compare financial data accurately.
It's important to note that once a fiscal year period is chosen, organizations generally maintain that consistent fiscal year annually to ensure comparability across accounting periods.
