fiscal year

Examples of fiscal year in the following topics:

• Defining Current Liabilities

  • Current liabilities are usually settled with cash or other assets within a fiscal year or operating cycle, whichever period is longer.
  • A current liability can be defined in one of two ways: (1) all liabilities of the business that are to be settled in cash within a firm's fiscal year or operating cycle, whichever period is longer or (2) all liabilities of the business that are to be settled by current assets or by the creation of new current liabilities.

• Defining Liabilities

  • An example of a deferred revenue account is an annual software license fee received on January 1 and earned over the course of a year.
  • The company's fiscal year end is May 31.
  • For the current fiscal year, the company will earn 5/12 of the fee and the remaining amount (7/12) stays in a deferred revenue account until it is earned in the next accounting period.
  • Long-term liabilities have maturity dates that extend past one year, such as bonds payable and pension obligations.

• The Disclosure Process

  • The resolution of the appeal of the jury award could have a significant effect on the Company's earnings in the year that a determination is made.
  • Information for the final quarter of a firm's fiscal year is included in the annual 10-K, so only three 10-Q filings are made each year.
  • Historically, a Form 10-K had to be filed with the SEC within 90 days after the end of the company's fiscal year.
  • These shortened deadlines were to be phased in over a three-year period; however, in 2004 the SEC postponed the three-year phase-in by one year.
  • As of December 27, 2005, the deadline for filing for large accelerated filers was still 75 days; however, beginning with the fiscal year ending on or after December 15, 2006, the deadline is 60 days.

• Reporting Current Liabilities

  • Current liabilities are typically due and paid for during the current accounting period or within a one year period.
  • For example, accounts payable for goods, services, or supplies that were purchased with credit and for use in the operation of the business and payable within a one-year period would be current liabilities.
  • Long-term liabilities can include bonds, mortgages, and loans that are payable over a term exceeding one year.
  • However, for all long-term liabilities, any amounts due in the current fiscal year are reported under the current liability section.

• What Goes on the Balances Sheet and What Goes in the Notes

  • Assets, liabilities, and the equity of stockholders are listed as of a specific date, such as the end of a fiscal year or accounting period.
  • Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a company's calendar year.
  • The balances in these accounts are typically due in the current accounting period or within one year.
  • If an error is found on a previous year's financial statement, a correction must be made and the financials reissued.

• Dealing with Foreign Currency and Bad Debts

  • Account receivables are classified as current assets, assuming that they are due within one calendar year or fiscal year.
  • The change in the bad debt provision from year to year is posted to the bad debt expense account in the income statement .

• Franchises and Licenses

  • If the contract requires that a lump sum be paid up front to secure the franchise rights for several years, the franchisee would record a franchise asset on its balance sheet.
  • If a business must pay licensing fees on a monthly or on an annual basis that coincides with the end of the business's fiscal year, the business does not record a license asset.
  • If the license is for multiple years or accounting periods and is acquired by paying an initial fee, the license is recorded as an asset on the balance sheet and its value equals what it cost to acquire the license.
  • Depending on when the balance sheet is issued, the useful life is presented as a number of months, quarters, or years.

• Write-Offs

  • When using the allowance method, an estimate is made at the end of each fiscal year of the amount of bad debt.
  • To explain this, assume that Jenkins Company began business on January 1, 2009, and decided to use the allowance method and make the adjusting entry for uncollectible accounts only at year-end.
  • If so, the allowance account would again develop a debit balance before the end-of-year 2010 adjustment.

• Key Considerations for the Statement of Cash Flows

  • A cash flow statement provides information beyond that available from other financial statements, such as the Income Statement and the Balance Sheet, through providing a reconciliation between the beginning and ending balances of cash and cash equivalents of a firm over a fiscal or accounting period.The main purpose of the statement, according to the Financial Accounting Standard Board (FASB) is to provide information about the changes of an entity's cash or cash equivalents in the accounting period .
  • In addition, the statement is used to assess the following: the company's ability to meet its obligations to service loans, pay dividends, etc.; the reasons for differences between reported and related cash flows; and the effect on its finances of major transactions in the year.

• Current Issues in Reporting and Disclosure

  • Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards 157: Fair Value Measurement, which "defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. " This statement is effective for financial reporting fiscal periods commencing after November 15, 2007 and the interim periods applicable.
  • It provides that qualified security dealers who elect mark to market treatment shall recognize gain or loss as if the property were sold for its fair market value on the last business day of the year, and any gain or loss shall be taken into account in that year.