What Is a Fiscal Year?
A fiscal year is the 12-month period a company uses for accounting and financial reporting, which may or may not align with the calendar year. It defines the span over which annual financial statements are prepared and taxes are calculated.
What a fiscal year is and why it matters
While many businesses use the calendar year (January 1–December 31), others choose a fiscal year that better fits their operating cycle — a retailer might end its year on January 31, after the holiday season, so peak activity falls in one reporting period. The fiscal year sets the boundaries for the income statement and the timing of year-end close, tax filing, and audits. Choosing a fiscal year that matches business rhythm can make reporting cleaner and reduce the burden of closing during a busy stretch.
A worked example
A US retailer selects a fiscal year running February 1 to January 31. Its "fiscal 2025" therefore covers February 2025 through January 2026, capturing the full holiday selling season within one reporting year. All of its annual financial statements, its year-end close, and its tax return are built around that February–January window rather than the calendar year.
How firms handle it today
Firms set each client's fiscal year in the accounting system and schedule year-end close, adjusting entries, and tax prep around that period boundary.
Related terms
- Year-end
- Income statement
- Tax liability
- Fiscal year
- Compliance
FAQ
What's the difference between a fiscal year and a calendar year?
A calendar year always runs January–December; a fiscal year is any 12-month period a company chooses for reporting, which may differ.
Can a business choose its fiscal year?
Yes, within tax rules — many pick a year-end that aligns with their natural business cycle.
Why would a company not use the calendar year?
To align reporting with its operating cycle, so peak activity and slow periods fall sensibly within the reporting year.