What Is the Fiscal Year End and Why Does It Matter?

A fiscal year end marks the close of a company’s 12-month accounting period. It serves as a cut-off point for analyzing financial performance over the preceding 12 months.

Defining the Fiscal Year End

A fiscal year is any continuous 12-month period a business or organization chooses for its financial reporting. The fiscal year end is the last day of this cycle.

Unlike a calendar year (January 1 to December 31), a fiscal year can begin on the first day of any month and end exactly 12 months later. For example, a company might choose a fiscal year that starts on February 1 and ends on January 31 of the following year. This means a fiscal year end could fall on March 31, June 30, September 30, or any other month’s end.

Over 65% of U.S. businesses use the calendar year for simplicity. The Internal Revenue Service (IRS) recognizes both calendar and fiscal years for tax purposes, defining a fiscal year as 12 consecutive months ending on the last day of any month except December.

Importance of the Fiscal Year End

The fiscal year end is important for businesses and organizations, serving as the basis for various financial activities. It is the time for preparing comprehensive financial statements, such as the income statement and balance sheet, which provide a snapshot of an entity’s financial position and performance. These statements are fundamental for internal analysis and external reporting.

For tax purposes, the fiscal year end determines when a company must file its annual tax returns. Corporations generally file income tax returns within six months of their fiscal period end. For instance, if a company’s fiscal year ends on June 30, its corporate tax return is typically due by September 15.

The fiscal year end is also a period for internal operational planning, including budgeting and performance reviews. It provides a clear cut-off point for financial projections and goal setting for the upcoming year. For businesses that undergo annual audits, the fiscal year end defines the period examined by outside auditors, ensuring compliance with accounting standards and regulations.

Why Businesses Choose Different Fiscal Year Ends

Businesses often choose a fiscal year end that does not align with December 31 for practical and operational reasons, rather than specific tax strategies. A primary reason is to align with their “natural business year,” which is typically the end of their slow season. Closing the books during a less busy period allows accounting departments to complete year-end tasks, such as reconciliations and financial statement preparation, more efficiently and accurately.

For example, many retail companies select a fiscal year ending on January 31. This allows them to include the entire holiday shopping season, including post-holiday sales and returns, within a single reporting period, providing a more accurate picture of their annual performance. Similarly, a luxury resort might choose a fiscal year end of September 30 to capture the full summer vacation season’s earnings. This alignment helps businesses to better evaluate year-over-year performance and provides clearer financials.

Variations in Fiscal Year Ends

Fiscal year ends vary across different types of organizations. The U.S. federal government operates on a fiscal year that runs from October 1 to September 30 of the following calendar year. This timing allows Congress more time to finalize the federal budget before the new fiscal year begins.

Non-profit organizations also choose fiscal years that best suit their operational cycles and funding streams. Many non-profits align their fiscal year with their program year or grant cycles. For instance, a youth enrichment non-profit operating summer camps might select a fiscal year from July 1 to June 30 to better track expenses and revenues related to each camp season.

While most individual taxpayers in the U.S. use a calendar year for income tax purposes, fiscal year ends can also differ internationally. For example, some countries have tax years for individuals that do not align with the calendar year, such as Australia where individuals pay income tax based on a July 1 to June 30 financial year. These variations reflect diverse operational needs and regulatory frameworks across different sectors and jurisdictions.