Understanding Fiscal Year
A fiscal year is a period of 12 months used by governments, businesses, and organizations to calculate financial statements and budgets. It does not always align with the calendar year and can start and end at any point during the year.
Importance of Fiscal Year
Having a set fiscal year helps businesses and organizations plan their finances, track their performance, and make informed decisions. It allows for better budgeting, forecasting, and comparison of financial data over time.
Types of Fiscal Year
- Calendar Year: Runs from January 1st to December 31st.
- Non-Calendar Fiscal Year: Does not follow the calendar year and starts on a different date.
- Seasonal Fiscal Year: Matches the peak sales seasons of a business, such as retail companies.
Examples of Fiscal Year
For example, a company that operates in the tourism industry may have a fiscal year that starts in October to account for the busy season leading into the holidays. Another example is the U.S. government, which operates on a fiscal year from October 1st to September 30th.
Case Study: Apple Inc.
Apple Inc. follows a fiscal year that starts on the last Saturday of September and ends on the last Friday of September. This non-calendar fiscal year allows them to align their financial reporting with their product launch cycles, giving investors a clearer picture of their performance.
Statistics on Fiscal Year
According to a survey conducted by the Corporate Executive Board, 67% of businesses use a calendar fiscal year, while 33% use a non-calendar fiscal year. This shows that there is a mix of approaches depending on the needs and industry of the organization.
