Origin, Definition & Use of Term "Fiscal Year"

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Greetings Everyone,

(I mistakenly posted this in the "tax" section, so I'll repost it here.)

I have a few quick questions about the expression "fiscal year" (FY).

(1) In the US, when a FY rather than a calendar year (Jan 1 - Dec 31) year is used, the fiscal year is designated by the year in which the FY _ends_. For example, the Senate glossary says in part "The fiscal year is designated by the calendar year in which it ends." I found just one website (of not unimpeachable authority) that definitively says the same applies for business firms, and although I'm 99% convinced that it does, I want to be sure. Can anyone give me an authoritative source that it does?Also, I believe UK companies end their FY on 30 June and I did confirm that UK firms use the ending year, not the beginning year. Can anyone confirm that this practice is universal, or that using the starting day of the FY would be absurd?

(2) If so, then can we say _with confidence_ that the expression "FY2013" is synonymous with saying "the fiscal year ended 2013." If this is true, then is this because the balance sheet date falls in the ending year?

(3) It seems sensible that, since an income statement presents results for the past year, and since the results for the coming year aren't known, it would be absurd to use the beginning year, but Japan uses the calendar year in which the period begins. (The FY for both the government and companies is April 1 - March 31.) That is, FY2013 ended on March 31, 2014. In fact, a quick survey of Japanese companies on the Net shows that about half of Japanese companies use the expression (for example) "Fiscal Year 2013" to indicate the year ended March 31, 2014. The other half use the Western method. I wonder whether and how many other countries or business firms do the same?

Many thanks in advance for any help.
 

Fidget

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Fiscal Year just means Financial Year. In the UK, there isn't a particular start/end date such as 30 June, although it will be the last day of the month in which a business is set up. So a business set up on any day in Jan, will have a fiscal year end 31 Jan, which basically means its fiscal year is going to be 1 Feb one year to 31 Jan the next, or a business set up in Sept will have a fiscal year of 1 Oct to 30 Sept the following year.

In terms of labelling the fiscal year in the UK, first, it's more commonly referred to as the financial year rather than fiscal year, and it would be the year in which it ends that would be used. That said, it's not uncommon for both years to be used, for example, 'financial year 2014/15'.

The tax year in the UK is a different kettle of fish - it runs from 6 April one year, to 5 April the following year and doesn't change so, for tax purposes and generally making life easier all round, it makes sense to align a financial year with the tax year, which would mean a financial year of 1 April one year to 31 March the following year for a business.
 
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Many thanks for these valuable comments, Fidget.

Your comments confirmed what I'd heard, namely that "financial year" is the more widely used expression in the UK.

As for the tax year, do you know what percentage of UK (or Commonwealth) companies align their financial years with the tax year? It seems that about 74% of US companies use the calendar year for their financial years.

What is interesting though is that the US Internal Revenue Service defines calendar years and fiscal years as mutually exclusive: "A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. A fiscal tax year is 12 consecutive months ending on the last day of any month _except_ December. A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month." Thus for the IRS, at least, one apparently can't say "our fiscal year is 1 January through 31 December." One must say "We use a calendar year, not a fiscal year." For this reason, using "financial year" indeed more sense. Colloquially, though, my sense is that Americans and some others use "fiscal year" in a vague sense simply to mean financial year and therefore might say "Our fiscal year coincides with the tax year."

I was very interested to read your remarks about the method of using a slash between both starting and finishing years (e.g., "FY2013/2014"). Indeed, a quick Net search shows that this is often used, though apparently not by any US companies as I could find. Also, it seems a dash (-) is more popular among Commonwealth companies while the slash (/) is more common among Continental and one Japanese company (Sharp). And, they all use the ending year.

This is why I want to know whether a professional accountant or other stakeholder would assume that any statement such as "FY2013" "obviously" means a financial year that _ends_ in 2013. I've got to find out why the Japanese government ever began using the starting year.

Any further comments would be greatly appreciated.
 

Fidget

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I'm afraid I've got no idea how many UK companies align their reporting year with the tax year, but the Office of National Statistics might have the answer to that. It accepts general enquiries and you can email them: http://www.ons.gov.uk/ons/site-information/information/contact-us/index.html

You could also look up the Japanese Embassy nearest to you and ask them about using the starting year. Although I expect it's just one of those things that Countries do differently - a bit like the standard date format in the US is mm/dd/yyyy whereas in the UK it's dd/mm/yyyy

And something I should've mentioned in my last post, when you do hear 'fiscal year' mentioned in the UK, it's in reference to the tax year.
 
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Many thanks for your further comments. I will definitely contact the UK ONS.

Actually I'm in Japan. (I'm a translator specializing in economics and finance.) I've been trying to think of whom I might contact about this FY issue. I'll probably begin with the JICPA. (I've got a pending inquiry to the BoJ regarding the usage of "bonds" in Japanese and English. Like fiscal year, it is all mixed up. I may be making a post here about that issue in the near future.

People accuse me of splitting hairs as a translator, but you know, if you translate something (or as an accountant prepare a report), then you've got to get it right because a misunderstanding might damage the party you're trying to help. I won't go into my philosophy of translation here, but I will say that my job is to ensure that the reader of my translations understands the concepts underlying the symbols, namely the words.

Your date example is therefore relevant. Commonwealth English and American English are different, so if a document is to be used in one sphere or the other, it should adapt to the form and practice of the user and not impose the forms and practices of the source. This would be true regardless of the population ratios. So if a document is to be used in the UK, I should use the UK date system even if the source document uses the American system.

As you know, U.S. Treasuries of maturities up to a year are called "bills," those with maturities up to 10 years are called "notes" and those of maturities greater than 10 years are called "bonds." This is why I want to find out the corresponding U.K. usage concerning Gilts, which I have't done yet but will. (If you can shed any light, by all means please do so.) My argument is that the officials of any non-English speaking country does not have the prerogative to alter the relationship between English words and the concepts they represent because the purpose of language is to communicate concepts, and any practice that undermines that purpose can not be considered legitimate, particularly when engaged in by non-native speakers. No one can stop anyone from borrowing word/symbols from one language and using them in any way they see fit, regardless of how absurd. But when used in the native country, the native form must be adopted.

Admittedly, I take a rather extreme conservative position on this issue, but consider: What if engineers or doctors in one culture decided to start altering the English usage regarding the specialized terminology in these fields. The result would be a kind of anarchy that would undermine the very foundation of the science. Language does of course evolve, the my perception and belief is that the bulk of this evolution takes place in the realm of the vernacular and not the formal form of the language. This is, I believe, as it should be, and indeed can be since every country, including native English-speaking peoples, Japan and China, for example, have both forms, and the incessant changes in the vernacular, anarchical as they may be, don't undermine the purpose of communication which the formal version is there to safeguard and preserve. This issue touches on many cultural issues (international accounting standards being one pertinent example here) affecting the world in this age of globalization which many, for good reasons I think, are resisting or at least cautious about. Such is the iceberg underneath my innocent-sounding initial question.

Again, many thanks for your very helpful comments.
 

Fidget

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I see. I was wondering why you were so interested Best of luck with your research on it all.

"Gilts" btw, is just another word for bonds that are issued by the UK Debt Management Office (DMO), on behalf of the UK Treasury.
 

Samir

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What if engineers or doctors in one culture decided to start altering the English usage regarding the specialized terminology in these fields. The result would be a kind of anarchy that would undermine the very foundation of the science.
I am very glad that someone out there takes this as seriously as you do. I have seen firsthand what happens when terminology starts getting altered--India is a good example. While there is a lot of IT and software work that goes on in that country, its use of terminology can be very difficult to understand by those in the western world who invented its use. Makes communicating a challenge at best.
 

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