fiscal year
fiscal year (FY), in finance and government, an annual accounting period for which an institution’s financial statements are prepared. Different countries and companies use different fiscal years (often referred to in financial records with the acronym FY), and the fiscal year need not align with the calendar year. While countries generally have a default fiscal year used by the government, they often allow individuals and organizations to employ different fiscal years based on their specific needs.
Although a fiscal year need not start at the beginning of the calendar year, it must be a yearlong period. In most cases, this means a period of 12 months—beginning, for example, on July 1 of one calendar year and running to June 30 of the next calendar year. However, a fiscal year can also be measured in whole weeks, such that it is either 52 or 53 weeks long. In that case, a day of the week is chosen, and the last occurrence of that day before a particular date, such as the end of a month, defines the fiscal year. For example, a fiscal year may end on the last Saturday in September, as represented in each of the successive fiscal-year periods listed below:
- FY2024: October 1, 2023–September 28, 2024 (52 weeks, or 364 days)
- FY2025: September 29, 2024–September 27, 2025 (52 weeks, or 364 days)
- FY2026: September 28, 2025–September 26, 2026 (52 weeks, or 364 days)
- FY2027: September 27, 2026–September 25, 2027 (52 weeks, or 364 days)
- FY2028: September 26, 2027–September 30, 2028 (53 weeks, or 371 days)
- FY2029: October 1, 2028–September 29, 2029 (52 weeks, or 364 days)
Generally, the choice of fiscal year reflects the relevant institution’s specific needs. For example, universities and other agencies or organizations related to education often choose a fiscal year that begins in the summer, thus allowing the fiscal year to align with the local school year. For businesses, the choice between a 12-month and a 52-to-53-week fiscal year will be based on the relevant revenue cycle. For many businesses, using a 12-month fiscal year facilitates year-to-year data comparisons, as each year will have the same number of days. However, some businesses have strong weekly revenue patterns, and so it is more important to them to begin and end accounting periods on the same day of the week. For example, a movie theatre that does most of its business on Saturdays and Sundays may choose a 52-to-53 week fiscal year to ensure that most periods have the same number of weekend days and can be more easily compared.
The fiscal year is often divided into months and quarters. Month often refers to particular calendar months, though 52-to-53-week fiscal years commonly use 13 to 14 4-week accounting periods, termed months, which need not align with calendar months. The fiscal quarters are usually January 1 to March 31, April 1 to June 30, July 1 to September 30, and October 1 to December 31. Quarters are often referred to with the abbreviations Q1, Q2, and so on. However, the particular quarter referred to as Q1 depends upon the type of fiscal year being used.
In roughly two-thirds of all countries, the government’s fiscal year is the calendar year. Most other countries begin their year at a different calendar quarter—e.g., April 1 through March 31, July 1 through June 30, or October 1 through September 30. In the United States, the government’s fiscal year begins on October 1, meaning that Q1 in the government’s fiscal year is October 1 to December 31, Q2 is January 1 to March 31, and so on.
A few countries choose other dates for their fiscal years. In Iran, for example, the fiscal year is set according to the Hijrī calendar, often called the Islamic calendar. Consequently, the start of the Iranian fiscal year, which usually begins on March 21, does not correspond to the beginning of any month in the Gregorian calendar, which is used in much of the rest of the world.
Great Britain’s unusual tax year also stems from a different calendar. Until the mid-18th century, the country used the Julian calendar, with the new year beginning on March 25, the date of the Christian Feast of the Annunciation (the celebration of the announcement by the angel Gabriel to the Virgin Mary that she would conceive a son by the power of the Holy Spirit to be called Jesus), also known as Lady Day. When the country adopted the Gregorian calendar in 1752 to better align itself with other countries in Europe, there was a mismatch between the calendars of about 11 days. Great Britain consequently extended its 1752 tax year by 11 days, to end on April 4, to ensure that no revenue was lost as a result of the shortened calendar year. The 1753 tax year thus began on April 5. In 1800 the start of the tax year was moved forward one more day, to April 6. However, though April 6 remains the start of the tax year for individuals, the British government and British corporations operate on a tax and fiscal year beginning slightly earlier, on April 1.
The fiscal year may or may not be equivalent to a country’s tax year. For example, in the United States, though the fiscal year begins in October, the tax year is usually the calendar year for individuals. However, businesses often choose to pay taxes according to their fiscal years. This is allowed, provided that the fiscal year is a consecutive 12-month or 52-to-53-week period other than the calendar year. It is possible for businesses to change their fiscal years, but any gaps that result must be recorded and filed as a short tax year.