Fiscal Year

A fiscal year (FY) is a one-year, or 12-month, accounting period used by companies and governments for financial reporting and budgeting. It provides a standardized timeframe for compiling financial statements like the profit and loss statement and balance sheet, allowing for consistent comparison of performance over time.

The fiscal year forms the basis of the annual planning cycle, where organizations set goals, allocate resources, and measure results. Companies often choose a fiscal year that aligns with their natural business cycle. For example, a retailer might end its fiscal year on January 31st to include the entire holiday shopping season in one reporting period.

While many organizations use the calendar year (January 1 to December 31) as their fiscal year, it is not a requirement. The chosen period is critical for both internal management reporting and external reporting to investors, lenders, and regulatory bodies.