In around two minutes you will know what is a Fiscal Year. You will get both professional definition and easy explanation. No intro, no outro, straight to the point.
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Fiscal Year is a one-year business activity period that companies and governments use for financial reporting and budgeting.
A fiscal year can be further divided into financial quarters. And if you are not sure what a financial quarter means, feel free to watch my previous video.
The only difference in terms of time keeping between fiscal and calendar year is when such periods begin and end.
Traditionally, a calendar year starts on January 1st and ends on December 31st. But fiscal year might be different, especially for cyclical businesses.
For example, if a company heavily relies on winter holidays sales, it might choose to end its fiscal year on January 31st and start it on February 1st. But, as you can see, there must always be 365 or 366 days in each fiscal year.
And the reason they might want to do it is to avoid having to deal with taxes during its busiest season.
Fiscal year for the US government starts on October 1st and ends on September 30th. And in this case, a very interesting thing might happen.
If there are spendings that are planned to happen let’s say on November 18th, 2021, such spendings will be recorded in fiscal year 2022. And the reason for this is because even though we are still in calendar year of 2021, the government fiscal year of 2022 has already started.
If you want to know when fiscal year for any publicly traded company starts and ends, just open any of its 10K annual financial reports. On the very first page you can see a line that says, for example: “For the fiscal year ended June 30th, 2020”. In this case it means that fiscal year for this company starts on July 1st and ends on June 30th.
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