The next earnings season is about to get underway. This time around, most companies will report first-quarter earnings that encompass the first three months of the year. But if a company runs on a different fiscal year, its time frame may vary. 

While the term "fiscal year" is a fairly simple concept, it's included in investing jargon that not everyone is familiar with. 

Read on as we explain what a fiscal year is and why it's important.

What is a fiscal year? 

A fiscal year is a 12-month period that a business, government or other organization chooses as its financial year. It can be any date as long as the fiscal year is 52 or 53 weeks. The 53rd week is accounted for by those that measure a year using 52 weeks vs 12 months, which results in an extra day each year or two additional days in a leap year. These extra days add up to an additional week every five to six years. 

What is the difference between a fiscal year and calendar year?

The Internal Revenue Service (IRS) a fiscal year as "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." 

A calendar year, on the other hand, is defined as "12 consecutive months beginning January 1 and ending December 31."

Most public companies choose a financial year that ends on December 31, putting it in alignment with a calendar year. Big bank JPMorgan Chase (JPM), whose quarterly financial reports typically signify the start of earnings season, runs on a calendar year. So when it reports first-quarter earnings in mid-April, the results will be for the three months ending March 31.

However, fellow Dow Jones stock Nike's (NKE) fiscal year starts in June. This means its next earnings report will feature the results from its fourth quarter which ends on May 31.

It is up to the discretion of the company or organization when their financial year ends.If a company's fiscal year does not run on the calendar year, it tends to be referenced with a "fiscal" in front of the quarter or year. For instance, Nike's upcoming earnings report will be referred to as its fiscal fourth quarter" or "fiscal Q4 2024." 

Why choose a calendar year over a fiscal year?

Every situation is different and sometimes a company will choose a fiscal year that does not align with the calendar year based on seasonal sales trends. Many retailers, for instance, will end their fiscal year in January to account for the annual holiday shopping rush from Thanksgiving Day and Black Friday through the end of January. Given that this is the busiest time of the year for most retailers, it makes sense to delay the year-end accounting that must take place to close the books for the financial year by a month. This includes accounting for the many returns every year after the holidays.Other industries sometimes follow different monthly year ends. In Canada, the banks close their financial year at the end of October, whereas American banks tend to have a December 31 year-end.  Why is that? Canadian banks aren't different from American banks."The banks agreed to an October year-end in 1965 as a favour to overworked accountants, who were always swamped from January to April (and twiddling their calculators the rest of the year, we can only assume). So, while there isn't anything seasonal about banking, there is for the folks counting the beans," in 2008.

If you're an iPhone user, you'll be happy to know that Apple's (AAPL) fiscal year ends on the last Saturday of September. Walt Disney's (DIS) fiscal year is also in September, although it ends on the Saturday closest to September 30. In Disney's case, it likely has chosen September because it's the end of the busy summer season at its resorts.

Where can I find a company's fiscal year?

The easiest way to find out what fiscal year a company uses is to look at its 10-K financial performance report that is filed with the Securities and Exchange Commission (SEC).The SEC's (Electronic Data Gathering, Analysis and Retrieval) system houses all regulatory filings submitted by public companies. Here, you can search by company and easily locate their 10-K filings. You can also find SEC filings on a company's Investor Relations page. At the top of a company's 10-K filing, you will see its fiscal year. for 2023 features the text "For the fiscal year ended December 31, 2023." At the top of Nike's , you'll see the text "For the fiscal year ended May 31, 2023."  

Why is a fiscal year important to investors?

While the exact date a company's fiscal year ends isn't generally something investors need to be concerned about, the year-end represents the successful completion of another 12 months in business. Unlike quarterly reports, the annual report provides investors with an understanding of a company's competitive situation from one year to the next. It's a snapshot in time that helps investors understand the pros and cons of the year that was and what's in store for the year ahead. 

Companies sometimes change their fiscal year end to align themselves with their peers, making it more easily comparable. In addition, you'll often see companies undertaking an initial public offering (IPO) change their year-end to make it to prospective investors. 

It's important to understand that every business will set its year-end based on particular needs. There's no one-size-fits-all. 

Related content

• Kiplinger's Earnings Calendar for This Week
• How Inflation, Deflation and Other 'Flations' Impact Your Stock Portfolio
• How to Earn a Decent Yield From Your Sweep Account