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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
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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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