Science Fair Project Encyclopedia
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 stay with that.
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 1 2004 through December 31 2004
- 2nd Quarter - January 1 2005 through March 31 2005
- 3rd Quarter - April 1 2005 through June 30 2005
- 4th Quarter - July 1 2005 through September 30 2005
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, but the personal tax year runs from April 6 to April 5, as a vestige of the old New Year of March 25 (Lady Day) in the Julian Calendar.
Companies that are units within a "group" of businesses must all use the same fiscal year, otherwise it would be possible to shift entries between units with different fiscal years, so the same resources would be counted more than once or not at all, making the annual report of the group's finances misleading.
In the "Enron scandal" in the U.S. in 2001-2002, the energy conglomerate was discovered to have gotten around the laws to prevent that kind of 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.
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