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What is Fiscal Year? | Meaning | Examples of Fiscal Year - YouTube
Channel: WallStreetMojo
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hello everyone hi welcome to the channel
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us by clicking the bell ican today we have
a topic you today we have a topic with
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us is called what is fiscal year see
every country has their own fiscal years
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you know in labor United states-led be
India or any other they have their own
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fiscal years now if you see if a united
nation it's it's January 30th 2016 so
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June 30 2016
so what is the fiscal years meaning
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that's the first thing that we'll try
and evaluate so fiscal year not FY is
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referred to as the period used for the
accounting purpose by the industry at
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large so it is a period that is lasting
closely around 12 months and it is used
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for budgeting purpose so account keeping
in all of the reporting for the industry
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so fiscal year of a country is set by
the the government and there is no
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universal standard on it so depending
upon a country you financially or may
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get changed and due to this constant
changing of accounting period across
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countries an analyst needs to take into
consideration during the preparing the
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reports no analyzing the financial
companies and so on and so forth so
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generally by law several jurisdictions
they demand they demand that the
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companies prepare and publish its
financials on an annual basis but the
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rule is applicable to the duration of
the reporting period and not on the
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place value so in order to make
reporting complete the reports are
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accompanied by the financial year for
which it has been reported like for
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example the financially 15
will report for financially 2015 know
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what is the need for this why there is
need for fiscal you see why it is
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important to have to defined termed for
accounting fear for companies that's a
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question see one of the reason why they
define it required for definite term is
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required for the financial report is
that you know the companies are listed
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on the country's illustrate Indy there
is in the country stock market as well
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so in today's world of connectivity
investors from different countries there
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are investing in companies listed in
different stock markets across globe in
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different time zones so in order to
facilitate streamline flow of
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information across different stock
exchange one has to be cognizant of the
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accounting periods know what is the
difference between the you know fiscal
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year versus the calendar year see fiscal
year versus calendar year so what is the
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difference between them if you see for
financially it's it starts from July for
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us to June but for calendar it starts
from Jan to December so you know this is
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a very specific accounting term which is
a neat neat note with need not
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necessarily start on January 1st of the
year and the fiscal year end on 31st
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December 31st but this can start at any
point there is no such restriction can
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start at any point is that it no it
needs to have a continuous period of 12
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months it means to have a period of 12
months to finish one accounting period
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so across different countries do you
financially I may not necessarily mean
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the same Period here and the calendar you however always fiscal year starts on the
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first day of the new year
okay that is in the month of January
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across country is the calendar year
refers to the same period okay oh the
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consecutive 12 months starting from
January 1st and ending it December 31st
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so some companies rather decide to
choose their financially that consists
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of only full weeks you know
that's fiscal year and fiscally end
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there on a particular day of the week so
in such case the length you know if you
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see the the length of the financial year
is not the exact thing or the no it's
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it's not exactly 12 months
insert you know some fiscal years are
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like you know 52 weeks and while some
are 53 weeks long and so on and so forth
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let's discuss some of the advantages so
you know one of the main deciding
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factors for companies while making the
choices of the financial year is their
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business cycle now some industry see a
parallel in their business cycle with a
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calendar you as it fits them better but
in such case the Optus calendar year as
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the reporting period instead of
financially and for other industries a
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better choice could be to follow
financially as their accounting period
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as the companies find it
counterproductive to follow calendar you
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for reporting that comes with the
adjustment for the mismatch in the
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accounting period and the business
cycles schools and colleges for instance
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you know they prefer to choose financial
year stating in the month of June as
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their accounting period and the reasons
for forth for this is that you know the
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time period color coincides with the
intake of the new batches of students
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basically now let's take an example here
let's say the retail industry in general
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see a surge in the business in December
and January holiday seasons now if the
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retailer chooses calendar year
then what so let's assume that for
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argument's sake you know that 2015
holiday season December 2015 and Jan
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2016 was exceptionally for the retailer
and 2016 holiday season was very poor
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so when comparing the two seasons the
following will happen
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first the high-performing months of
December 15 now they will get included
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in the in 2015 year-end result only
now however one high-performing month of
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December 16 is included in 2016 results
okay when we compare 2015 results with
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our own 2016 we know that you know the
comparison is not at all fruitful at all
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as the full effect of seasonality is
yeah captured so if if the retailer
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followed the fiscal year the retail
choosey you financially different from
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the calendar year let's say the the
retail company is the Beaufort 1st of
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April choose a 1st of April to 31st of
March then you know financial year 2016
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will include the high-performing months
like great December 15 and Jan 2016 and
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financial year 2017 will include under
under performing months like December 16
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and Jan 17 so this time when we compare
financial year 2016 with out of 2017 we
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can effectively contrast the excellent
season with that of the poor season they were
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effectively capturing the seasonality
now which are the commonly used commonly
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used fiscal year which are them the
first one is from 1st of Jan to 31st of
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December then you have 1st of April to
31st of March that's one of them you
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have 1st of July to 30th of June and
then you have 1st of October to 30th of
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October the 30th of September
of fiscal years usually you know denoted
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by the year in which it ends so if a
business follows the April to watch
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financial cycle then the financial year
will be 2017 and for the
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period from 1st of April 2016 to 31st of
March 2017 so on the concluding note in
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the above tutorial we looked at why there
is a need to having a definite term
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financially and understood its meaning
for the curious ones there are multiple
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sources on web highlighting the
advantage of choosing a particular
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period as it's financially over and in
generally the decision of choosing the
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financially or for a company is very
specific to the business cycle so the
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reporting deadlines of the country in
which it operates and demographics so
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that's it for this particular topic if
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