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Fiscal year

From Academic Kids

A fiscal year or financial year is a 12-month period used for calculating annual ("yearly") financial reports in businesses and other organizations. In many jurisdictions, regulatory laws regarding accounting require such reports once per twelve months, but do not require that the twelve months consitute a calendar year (i.e. January to December). However, a new company or business has to decide at the beginning on which month their fiscal year will start, and then (generally) stay with it.

Such fiscal years are typically numbered using a calendar year and quarter thereof. A fiscal year quarter is 3 months (1/4 of a year) long. For example, the United States Government fiscal year for 2005 is as follows:

  • 1st Quarter: October 04 - December 04
  • 2nd Quarter: January 05 - March 05
  • 3rd Quarter: April 05 - June 05
  • 4th Quarter: July 05 - September 05

So the US Government's fiscal year begins on October 1 of the previous calendar year and ends on September 30 of the year with which it is numbered.

In the United Kingdom, the government's financial year runs from April 1 to March 31, and corporation tax is charged by reference to that period. However, the personal tax year (which governs liability to income tax and capital gains tax) runs from April 6 to April 5. This reflects the old ecclesiastical calendar, with New Year falling on March 25 (Lady Day), the difference between 6 April and 25 March being accounted for by the eleven days "missed out" when the UK converted from the Julian Calendar to the Gregorian Calendar in 1752 (the UK tax authorities were unwilling to lose 11 days of tax revenue, so the 1752/3 tax year was extended by 11 days).

Companies that are units within a "group" of businesses must all use the nearly the same fiscal year (differences of up to three months are permitted in most jurisdictions, such as the U.S. and Japan), with consolidating entries to adjust for transactions between units with different fiscal years, so the same resources will not be counted more than once or not at all.

In the "Enron scandal" in the U.S. in 20012002, the energy conglomerate was discovered to have attempted to go around the laws to prevent fraud by setting up dummy businesses that passed the bookkeeping entries back and forth, increasing their size on each pass, thus shifting the bogus numbers in space instead of in time, in a clear violation of consolidated financial statement preparation principles.

sv:Räkenskapsåreo:Financa jaroja:会計年度

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