We explain what a fiscal year and a commercial year are, their duration and what they are for. Also, how are they different from a calendar year.
What are a fiscal year and a business year?
A fiscal year or financial year and a commercial year are types of time organization different from the calendar year that is, the traditional year reflected in the calendars and which runs from January 1 to December 31. In both cases, their origin is due to considerations specific to the economic sector, and they imply adjustments to the ordinary calendar. to reflect the interests of financial and commercial activity.
This way, A fiscal year is the period of 12 months over which accounting and tax obligations are recorded so that its content is reflected in the annual financial reports. This means that a fiscal year is the beginning and closing of a financial cycle in a given country, and said cycle may or may not coincide with a calendar year, that is, it may begin on January 1 and end on December 31, or it may correspond to different dates, depending on the legislation of each country.
On the other hand, a business year is the period of 360 days along which the commercial and economic activity of a country or a region takes place, and which Used to calculate bank interest and discounts. Although the business year lasts the 12 months of the ordinary year, its 360 days (instead of the calendar's 365) are considered an annual average to compensate for the fact that some months have 30 days and others 31. Thus, In the calculation of the business year, all months are considered 30.
Both the fiscal year and the commercial year are of importance for economic and financial planning and administration, and respond to the laws and regulations of each country.
See also: Banking law
Differences between a fiscal year and a calendar year
The main difference between a fiscal year and a calendar year lies not in its length (12 months in both cases), but in its starting and closing points:
- The calendar year always begins on January 1 and ends on December 31
- The beginning of the fiscal year follows the legal considerations of each country so that it can coincide with the calendar year (as in Spain, Argentina, Colombia and other countries), start on October 1 and end on September 30 of the next year (as in Costa Rica) or have free margins (as in Sweden or Venezuela).
In all these cases, however, the fiscal year will always last 12 months.
Fiscal year in Mexico
In Mexico there is a regular and an irregular regime to determine fiscal years. Normally, the fiscal year coincides with the calendar year that is, it begins on January 1 and ends on December 31, and this is the year that the State uses for its accounting and affairs. However, If a legal entity begins its economic activities on a day after that date, it is permitted by law to carry out an irregular fiscal year at its own decision, as long as it starts and closes within a fixed period of 12 months.
Continue with: Year
References
- “Fiscal year” on Wikipedia.
- “Business year” on Wikipedia.
- “Accounting Tax Dictionary” in the Internal Revenue Service (Chile).
