Fiscal Year Vs Financial Year

Fiscal Year Vs Financial Year: What Is The Difference?

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Accounting

There are no significant differences between the terms “fiscal year” and “financial year”. Both of them indicate the 12 consecutive months of the accounting period. It is easy to misunderstand the precise meanings of the many technical terms used when discussing yearly accounts and taxes such as calendar year, 52-53 week tax year, financial year, and fiscal year due to the differences in how these terms are used in other countries, like the United Kingdom.

Fiscal Year Vs Calendar Year

Within the United States, the Gregorian calendar, a 365-day timeline from January 1st to December 31st is a common tool for the calendar year according to the solar cycles. Besides universally recognized calendar systems such as the Gregorian, Islamic lunar, Indian, civil, and Chinese calendars, there are also other calendar systems used globally. While many businesses do their business on the calendar year which starts at the same time as it ends universally, it does not have the same impact on other activities such as climate and events. While fiscal years can commence from any day of a month’s first day, they are however much flexible. For example, most schools have their own fiscal year, which is set in line of the academic year, to make the financial planning manageable.

Tax Year Vs Fiscal Year

For the purposes of taxation, you need a tax period to compute your income and deductions for tax. However, individuals and most small businesses must comply with the Internal Revenue Service (IRS) rules and use the calendar year method. But the exception does exist for businesses that can prove to the IRS there is a good reason for such business to report their income and expenses in an alternative method. If you wish to use budget for another fiscal period, it is a must to meet some requirements, for example, you have to keep up with the specific accounting methods and submit Form 1128.

Fiscal Year Vs.52-53-Week Year

The IRS permits businesses to use a 52-53-week tax year as a substitute for the fiscal and the calendar year. Under this alternative, a business can prepare its books and report the year’s income using 52 to 53 weeks of data that varies from 12 complete months, which makes it possible to start the financial year on any given day of a month. Nonetheless, firms using this approach should always finish their financial year having the same ending day of the week in any circumstance.

United Kingdom Fiscal Year

In the UK, fiscal and financial year are also synonyms but these terms are meant to different things. According to a UK government source, it is based on the British tax year that begins on April 6 and ends on April 5 of the next year. 

The unique beginning date was invented in 1753 when England finished transferring from the Julian to the Gregorian calendar. Then the legal year finished on March, 24. Restarting the country into the Gregorian calendar meant to lose 11 days and this was a big downside for tax collection by the government that year. In order to prevent this, the government came up with an idea to extend the tax year by 11 days from March 24 to April 5.

Hong Kong Fiscal Year

In Hong Kong, the fiscal year period is conventional and runs from April 1 through March 31 of the next year on a calendar. This is a critical period for time schedules, financial reporting, and budgeting procedures of the government.

The government adopts the budget on a fiscal year basis. The budgeting process involves designing the plan which accounts for the expected expenditures, revenue sources, and financial priorities. The presentation of this budget to the Legislative Council starts as the blueprint for the spending budget of the government and revenue collection.

Across the budget year, the ministries and agencies of the government proceed with their budget management, their spending monitoring, and a lot of other programs’ and projects’ implementations for the sake of the public to be helped. Monitoring of the achieved level of financial results is necessary to prevent prognosed expenses from exceeding the budget limit and the gaps from revenue plan not being covered.

At the close of fiscal year the government presents balance sheets and business report to all the stakeholders. Thus, it provides a clear situation about issue of finance and results of the completed 12 month. These statements are audited by the independent auditors to confirm that accuracy and irreproachability in the conformance with accounting standards are obtained.

The fiscal year cycle in Hong Kong provides a fundamental support to financial stability, accountability and transparency in government operations through effective public finance management. It is achieved through systematic and well-planned utilization of public funds and resources.

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