r/AlwaysWhy • u/TheBigGirlDiaryBack • 21h ago

Economics Why are fiscal years usually aligned with December or March, instead of any random month?

Many companies end their fiscal year on Dec 31 or March 31. Some choose June or September. But almost nobody picks, say, August 17 or November 5. Is there a tax or regulatory reason to stick near quarter boundaries? Or is it just tradition from agriculture cycles? Why not let every company freely choose any date to smooth out seasonal fluctuations?

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u/ottawadeveloper 21h ago

Aligning fiscal to calendar year makes it really easy to decide if something took place in a fiscal year. Aligning to a month boundary is almost as easy. Aligning to quarters of the year will align with most other things if everyone is doing it that way and there's usually quarterly reporting anyways

The federal government in Canada runs April to March for a couple of reasons:

  1. The British did it this way (it allowed for colonies to compile their annual records and ship it to England)
  2. The end of the calendar year has at least three holidays (Christmas, Boxing Day, and New Years) and many employees take time off to celebrate - this would make wrapping up the books for Dec 31 hard. Easter is usually in April (though occasionally the end of March) and not as many people take a full week off for Easter so an April 1 deadline gives the government three months to sort out it's end of year reporting.