Fiscal Quarter

A Fiscal Quarter refers to the period of three consecutive months of any of the fiscal years that the company uses to report its business results. The same is vital for the publicly traded companies as they must present specific information on an ongoing basis to the Securities and Exchange Commission concerning their quarterly performance in form 10-Q.

The fiscal quarter may not be same for all companies operating in the market as it is not necessarily the months aligning with the calendar quarters. Hence, which months are included in the first three quarters of a company completely depends on what it normally considers.

Fiscal quarter is different from the usual quarters considered per calendar years. In short, these quarters are not necessarily same as the usual quarters considered by a layman. The quarters Q1, Q2, Q3 and Q4 for organizations differ and based on their defined fiscal quarter schedule, the financial reports are prepared. These reports are then referred to by the investors and other stakeholders to assess the business performances before making an investment or other business decisions.  

It is the consecutive three-month period of any fiscal year as decided by the company to report its business results and meet the other requirements. The company’s management has to decide when the fiscal quarter will start.

This quarter plays an important role. For each of the first three fiscal quarters of the fiscal year, Form 10-Q must be submitted by publicly traded companies to the securities and exchange commission within a specified time as provided from the end of the fiscal quarter. However, the last or fourth fiscal quarter report is then combined with the whole report for the fiscal year and submitted to the securities and exchange commission in Form 10-K.

The concept of the fiscal year is not compulsory in the case of privately-held organizations because they are not required to file Form 10-Q and Form 10-K with the Securities and Exchange Commission. However, the same is vital in the case of the publicly traded companies, as they have to submit Form 10-Q for each of the first three fiscal quarters of the fiscal year to the Securities and Exchange Commission within a specified time as provided from the end of a fiscal quarter.

The following instances help understand the fiscal quarter meaning in a better manner.

Example #1

“A ltd" is a publicly held company manufacturing and selling automobile products in the market. Suppose the company chooses the fiscal year to be the same as the calendar year, then what will be the fiscal quarters and the fiscal year 2019?

Solution

A fiscal quarter refers to the period of three consecutive months of any of the fiscal years that the company uses to report its business results. In the present case, fiscal quarter one will start on 01^st January 2019 and will end on 31^st March 2019, quarter two will start on 01^st April 2019 and will end on 30^th June 2019, and the quarter three will start on 01^st July 2019, and will end on 30^th September 2019. Also, as the fiscal year is the same as the calendar year, the fiscal year will start on 01^st January 2019 and end on 30th December 2019.

The fiscal quarter in Excel can be prepared as below:

Example #2

Company B ltd is a publicly traded company that conducts the business of manufacturing and selling garments in the market. The company wishes to keep both the calendar year and fiscal year separately and decided to start the fiscal year on July 01, 2019. In that case, what will be the fiscal quarters and the fiscal year for the company for the year 2019?

Solution

A fiscal quarter will be three consecutive months of any fiscal year as decided by the company to report its business results and meet the other requirements. In the present case, fiscal quarter one will start on July 01, 2019, and will end on September 30, 2019, quarter two will start on October 01, 2019, and will end on December 31, 2019, and the quarter three will start on January 01, 2019, and will end on March 31, 2019. Also, the fiscal year, in this case, will start on July 01, 2019, and will end on June 30, 2019.

Fiscal quarters play an important role in any organization as the stakeholders wait for the financial statements to be released at the end of every quarter – Q1, Q2 and Q3 – as defined by the respective organization. Listed below are some points to check out the significance of these quarters for businesses:

• The financial statements in the form of quarterly reports are released by the organization, which makes the defined quarters important in assessing and presenting the track record of any company.
• Based on the reports released, the management and investors make wiser and more effective business and investment decisions, respectively.
• Comparing the performance of one’s business with another becomes easier when the assessment is done quarterly.
• These quarterly reports released in defined fiscal quarter schedule are also used for multiple tax purposes.

The following are the different advantages –

• This concept is beneficial for the companies that have seasonal businesses. It would enable the company to maintain the records properly and compare its performance with the same fiscal quarter of the previous year.
• For each of the first three quarters of the fiscal year, Form 10-Q must be submitted by publicly traded companies to the securities and exchange commission within the specified time as provided from the end of a fiscal quarter. However, the last or fourth fiscal quarter report is then combined with the whole report for the fiscal year and submitted to the Securities and Exchange Commission in Form 10-K. So, this reporting follows the fiscal quarter and year concept and not the calendar year concept.

The following are different disadvantages –

• Companies must submit various company details to the concerned authority for every fiscal quarter. If there is no fiscal quarter and no reporting, the company could invest the same time in achieving its long-term goals. It increases the burden on the company and increases the pressure as the companies have to deliver the short-term results in due time for the use of the stakeholders.
• According to some laws, some information is required to be followed as per the calendar year quarter, so the next quarters as per both calendar year and fiscal year becomes difficult.

Quarters are categorized into two types – the first one is the fiscal quarter and the other one is calendar quarter. While there is a possibility of these two being the same for an organization, it is likely for most organizations to have differently defined fiscal quarters. Let us have a look at the differences between the fiscal and calendar quarters below:

• Calendar quarters refer to the standard quarters of any year, starting with January to March as quarter 1, while fiscal quarters are different and not necessarily be the same as the first quarter of the calendar. For example, the first quarter or Q1 may be October-December instead of January-March.
• While calendar quarters correspond to the calendar year, fiscal quarters correspond to the fiscal year as defined by different companies. It may or may not be same as the quarters of the calendar year.
• For example, the calendar year 2023 is common and quarter 1 or Q1 for everyone around the globe is January 1 to March 31. However, first fiscal quarter 2023 or Q1 2023 for the US government, like every other year, began with October 1 and ended on December 31 as it’s fiscal year begins and ends on October 1 and September 31, respectively.
• The concept of the fiscal year is not compulsory in the case of privately-held organizations because they are not required to file Form 10-Q and Form 10-K with the Securities and Exchange Commission. However, the same is vital in the case of the publicly traded companies, as they have to submit Form 10-Q for each of the first three fiscal quarters of the fiscal year to the Securities and Exchange Commission within a specified time as provided from the end of a fiscal quarter.

This has been a guide to what is Fiscal Quarter. Here, we explain its difference with calendar quarter, examples, importance, advantages, and disadvantages. You can learn more about accounting from the following articles –

• Quarterly Report Format
• Fiscal Year-End Example
• Accounting Period
• Fiscal Year in USA