Financial year

economic-dictionary

The financial year is one that establishes the operation of states and different organizations and institutions. It is a period of twelve months through which the economic operation of these and the development of their different activities is framed.

The most common is that the financial year coincides with the one known as the calendar year. That is, it starts on January 1 of each year and ends on December 31.

However, it is also possible that the fiscal year begins on July 1 and ends on June 30 of the following year. In fact, this type of economic year was followed by the Public Administration of the Spanish State until 1899.

The fixation of a certain economic year is usually considered useful when establishing measurements or comparisons of the different economic variables that are common in the day-to-day life of a country or organization. For example, there is the measurement of GDP taking as a reference the different years (GDP 2017, GDP 2018 ...)

Economic year vs. financial or fiscal year

Often the concept of fiscal year is usually identified with that of financial or fiscal year. The same happens because at each end of the financial year, it is usual that the fiscal or financial closure of all accounts is carried out for their regularization and the corresponding fiscal weight is calculated.

However, the fiscal year is often considered to be established from a private point of view. Or explained in another way, each company establishes its fiscal year while the economic year is understood as a concept more applied to the economic environment and the country in which the activity is carried out.

In other words, in a particular territory each company may have a different fiscal or financial year, but they all share the same economic year established by their corresponding country.

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