The next financial year is about to begin. This time, most companies are expected to report earnings for the first quarter, which includes the first three months of the year. However, if the company operates with different fiscal years, the periods may be different.
Although the term “fiscal year” is a very simple concept, investment terms Not everyone is familiar with it.
Read on as we explain what a fiscal year is and why it's important.
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What is a fiscal year?
A fiscal year is a 12-month period that businesses, governments, and other organizations choose as their fiscal year. You can specify any date if the fiscal year is 52 or 53 weeks.
The 53rd week is calculated by using 52 weeks over 12 months to measure a year, resulting in one extra day each year, or two extra days in leap years. This extra number of days adds an additional week every five to six years.
What is the difference between a fiscal year and a calendar year?
Internal Revenue Service (IRS) Define A fiscal year is “a 12 consecutive month ending on the last day of any month except December. A 52- to 53-week tax year varies from 52 to 53 weeks but ends on the last day of December. It is not necessary to have a fiscal year.” month. ”
A calendar year, on the other hand, is defined as “12 consecutive months beginning on January 1st and ending on December 31st.”
Most publicly traded companies choose a fiscal year ending on December 31 to align with the calendar year. Big bank JPMorgan Chase (JPM)'s quarterly financial report typically marks the start of earnings season and operates on a calendar year. So when it releases first-quarter earnings in mid-April, those results cover the three months ending March 31st.
But fellow Dow Jones stock Nike (NKE)'s fiscal year begins in June. This means the company's next earnings report will feature results for the fourth quarter ending May 31st.
The end of the fiscal year is at the discretion of the company or organization.
When a company's fiscal year is not a calendar year, it tends to be referred to with “fiscal year” before the quarter or year. For example, Nike's upcoming earnings report will be called “Fiscal Q4” or “FY2024 Q4.”
Why choose calendar year instead of fiscal year?
Every situation is different, and businesses may choose a fiscal year that does not coincide with the calendar year based on seasonal sales trends. For example, many retailers end their fiscal year in January in preparation for the annual holiday shopping season that runs from Thanksgiving and Black Friday to the end of January.
Given that this is the busiest time of the year for most retailers, it makes sense to delay the year-end accounting that must be done to close the books for the financial year by a month. This also includes the many returns that occur after the holidays each year.
Other industries may follow different month-ends. In Canada, banks end their fiscal year at the end of October, while American banks tend to end their fiscal year at December 31st.
why is that? Canadian banks are no different from American banks.
“Banks agreed in 1965 to close their accounts in October as a favor to overworked accountants, who were always busy from January to April (and fiddling with calculators the rest of the year). So there's nothing seasonal about banking, but for those who are counting the beans. ” The Globe and Mail reported In 2008.
If you're an iPhone user, you'll be happy to know that Apple's (AAPL) fiscal year ends on the last Saturday in September. Walt Disney's (DIS) fiscal year also ends in September, but on the Saturday closest to September 30th. In Disney's case, he probably chose September because that's the end of the resort's busy summer season.
Where can I find my company's fiscal year?
The easiest way to determine which fiscal year a company uses is to review its 10-K financial performance report filed with the Securities and Exchange Commission (SEC).
SEC. edgar (Electronic Data Collection, Analysis, and Search) system stores all regulatory filings filed by public companies. Here you can search by company and easily find his 10-K application for that company. SEC filings can also be found on the company's Investor Relations page.
The top of a company's 10-K return shows its fiscal year. JP Morgan's 10-K filing for 2023 displays the text “For fiscal years ending December 31, 2023.”Standing at the top of Nike Recently filed annual 10-KThe text “For fiscal years ending May 31, 2023” appears.
Why is the fiscal year important to investors?
The exact date when a company's fiscal year ends isn't usually of concern to investors, but the end of the year means another 12 months of business are well under way. Unlike quarterly reports, annual reports give investors an understanding of a company's competitive landscape over the past year.
This is a snapshot in time to help investors understand the strengths and weaknesses of this year and what's to come in the year ahead.
Companies may change their fiscal year end to align with their industry peers to facilitate comparisons. Furthermore, we often see companies making initial public offerings (IPO) Change the end of the year and get it done. more attractive To future investors.
It's important to understand that all companies set year-end dates based on their specific needs. There is no one-size-fits-all method.
