Fiscal Quarter (Definition, Examples) | Purpose of Fiscal Quarter

Fiscal Quarter Definition

Fiscal quarter refers to the period of three consecutive months of any of the fiscal year which the company uses for the purpose of reporting the results of its business and the same is important for the publically traded companies as they are required to present certain information on ongoing basis to the Securities and Exchange Commission with respect to its quarterly performance in form 10-Q.

Fiscal Quarter Examples

The following are examples of this concept to understand it in a better manner.

Example #1

A ltd is the publicly held company which is manufacturing and selling the 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 for the year 2019?

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Solution

A fiscal quarter refers to the period of three consecutive months of any of the fiscal year which the company uses for the purpose of reporting the results of its business. In the present case fiscal quarter, 1 will start on 01^st January 2019 and will end on 31^st March 2019, quarter 2 will start on 01^st April 2019 and will end on 30^th June 2019 and the quarter 3 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, so the fiscal year will start on 01^st January 2019 and will end on 30th December 2019.

Example #2

Company B ltd is the publicly traded company that conducts the business of manufacturing and selling the garments in the market. The company wishes to keep both the calendar year and fiscal year separately and decided to start the fiscal year from 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 the period of three consecutive months of any of the fiscal year as decided by the company for the purpose of reporting the results of its business and meeting the other requirements. In the present case fiscal quarter 1 will start on July 01, 2019 and will end on September 30, 2019, quarter 2 will start on October 01, 2019 and will end on December 31, 2019, and the quarter 3 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 Quarter Advantages

The following are the different advantages –

This concept is beneficial for the companies which are having the seasonal business as this would enable the company in maintaining the records properly and also to make the comparison of its performance with that of the performance of the same fiscal quarter of the previous year.
For each of the first three quarters of the fiscal year, Form 10-Q is required to 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 report for the last or fourth fiscal quarter is then combined with the whole report for fiscal year and submitted on 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.

Disadvantages

The following are different disadvantages –

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

Important Points

The following are different important points –

The period of three consecutive months of any of the fiscal year as decided by the company which may be the same or may not be the same with the calendar year and used for the purpose of reporting the results of its business and meeting the other requirements.
For each of the first three fiscal quarters of the fiscal year, Form 10-Q is required to be submitted by publically traded companies to the securities and exchange commission within a specified time as provided from the end of the fiscal quarter. However, the report for the last or fourth fiscal quarter is then combined with the whole report for the fiscal year and submitted on the securities and exchange commission in Form 10-K. Here this quarter plays an important role.
The concept of the fiscal year is not applicable in case of the Privately held organizations because they are not required to file Form 10-Q and Form 10-K with the Securities and Exchange Commission.

Conclusion

It is the period of three consecutive months of any of the fiscal year as decided by the company for the purpose of reporting the results of its business and meeting the other requirements. It is the management of the company who has to decide that from when the fiscal quarter will start.

The concept of the fiscal year is not compulsory in case of the 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 important in 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.