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Finance: What is a Fiscal Year v. Calendar Year? 28 Views


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What is Fiscal Year v. Calendar Year? A fiscal year is any 12-month period that a company elects to use for tax purposes. It can be any 12 months in a row except of course 12 months that end with December because that would be a traditional calendar year. They may do this because their start of business doesn’t align with the calendar year, or for a number of reasons, in which case tax day for them wouldn’t be April 15th, it would be the 15th day of the fourth month of their fiscal year.

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00:00

Finance allah shmoop what is a fiscal year versus a

00:06

calendar year Well let's start with the latter calendar year

00:11

that's this thing It starts january one with a hangover

00:14

and ends at midnight December thirty one with a big

00:17

fat ball dropping in new york No this thing different

00:21

ball paul's Never All right So that's a calendar year

00:24

and okay so what is a fiscal year And how

00:27

is it different from a calendar year Well it isn't

00:30

always different Actually a fiscal year just refers to the

00:34

one year period in which companies track and report their

00:37

financial story Some companies report from january one to december

00:42

thirty one right like their fiscal year maps on top

00:45

of the calendar year But in some cases this reporting

00:48

system was misleading or problematic for investors Why All right

00:53

Well let's take macy's please They used to be somebody

00:56

Somebody They had parades and white flower day sales and

01:00

people used to actually go to their stores So macy's

01:03

did some huge percentage of its sales for the year

01:07

right around christmas And before you know computers were really

01:11

a thing it often took weeks or months toe fairly

01:14

And accurately add everything up so macy's among others decided

01:20

to change their fiscal year They were powerful back then

01:23

so you know they could do things like that So

01:25

they moved their year to run from july one until

01:29

june thirty that is that became their fiscal year it's

01:33

still a year still three hundred sixty five days still

01:36

everything the same With the exception of the start and

01:39

end points this way When things were relatively quiet at

01:43

the end of june the macy's bean counters could properly

01:47

count their year end beans in relative peace and harmony

01:50

Having caught up from the day luge of frenzied christmas

01:54

sales it gets even more complex in that some companies

01:57

wanted to be fully off kilter for any comparable calendar

02:02

years Oracle the database company for example is one of

02:05

them Savvy buyers of databases would wait until just before

02:10

the quarter ended for oracle hoping to negotiate better rates

02:14

in renting their database needs It was dangerous for a

02:18

company to miss its quarter with so much competition in

02:21

silicon valley from startups to steal those precious engineers from

02:25

big companies and put him into running a startups You

02:28

know big companies and they paid in cash and modest

02:31

stock options You can't really get rich these days working

02:34

at oracle if oracle ever missed a quarter while it

02:37

would hemorrhage engineers to the venture capital people hovering in

02:40

the hallways so oracle moved its fiscal ofthe month I'ii

02:44

february may august november kind of vibe so that wouldn't

02:49

be quite as held hostage by those savvy database renters

02:53

hoping for a macy style midnight white flower day sale

02:57

Now that's something worthy of a parade There's a database 00:03:00.715 --> [endTime] parade

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