What does ‘Fiscal Year-End’ mean
Fiscal year-end is the completion of a one-year, or 12-month, accounting period. The reason that a company’s fiscal year often differs from the calendar year and may not close on Dec. 31 is due to the nature of a company’s needs. If the fiscal year-end is too close to a heavy selling season, the company may have a hard time producing annual financial statements and counting inventories because manpower and resources are dedicated to the sales floor.
BREAKING DOWN ‘Fiscal Year-End’
Every year public companies are required to publish financial statements for review by the Securities and Exchange Commission. These documents 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 at the end of each fiscal year-end. The fiscal year-end depends on the company. While most companies have a fiscal year-end at the end of December, others vary based on the industry or some other business need. Many companies operate on a non-calendar business cycle or have a supplier base that does.
Fiscal Year-End Vs. Calendar Year-End
For example, 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 Dec. 31. However, many companies, such as those in the retail sector, have a fiscal year that ends in January due to the heavy sales cycle during the holiday season. These companies have a fiscal year-end of Jan. 31 rather than Dec. 31. Some might say that the academic year-end is August because it starts in September. The best time for a resort to report earnings is probably after vacation season. The best fiscal year-end for any one business is generally designed with the needs of the company in mind. However, companies must decide on their fiscal year-end when they file for incorporation. It is not something that can 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 the fiscal year-end.
Analysts rely on comparative data to identify trends and create forecasts. For example, if the analyst compares two companies with different fiscal years, it may skew the analysis, so it is important to convert one company to the other company’s fiscal year. This is especially the case for companies in seasonal industries.