Why do companies have a fiscal year different from the calendar year?

I can think of a few good reasons:

• A company, especially public, usually wants their fourth-quarter earnings to be the strongest of the year. That ends each fiscal year on a high note for the company and its investors, which helps public sentiment and boosts stock prices. So, travel agencies and airlines usually like ending their year in October or March, in the lull between the summer and winter travel seasons with a large amount of that revenue falling within the company's fiscal Q4. Oil companies sometimes do the same because fuel prices are seasonal for much the same reasons.

  • The downside of the above approach is that you make or break your entire year on your last quarter, which can cause problems for companies with scheduled dividends. Usually that's not a huge concern, as dividends are based on profits, so if there aren't any profits there aren't any dividends. However, in such cases a bad Q4 which also sends the entire company's year into the red is a double-whammy for stock prices. If this is a concern, a schedule with strong Q1 and Q3 earnings, with decent Q4 (second or third-best season) and a "dump" in Q2 (weakest season) is typically the best overall bet.

• December is a really bad month to try to close out an entire year's accounting books. Accountants and execs are on vacation for large parts of the month, most retail stores are flooded with revenue (and then contra-revenue as items are returned) that takes time to account at the store level and then filter up to the corporate office, etc etc. It also doesn't tell the whole story for most retail outfits; December sales are usually inflated by purchases that are then returned in January after all the hullaballoo. As a result, a fiscal year end in January or even February keeps the entire season's revenues and expenses in one fiscal year.

  • The downside of the above is that a February fiscal year-end normalizes your December earnings. Investors expect bad Q1 reports for most retail; consumers are looking at credit card statements and tightening belts. Conversely, investors expect huge calendar Q4 numbers; to lump some of the bad news of returns and lower revenues in with your best sales quarter may cause you to continually fail to meet speculator's expectations which will cause your stock to be devalued relative to competitors.

Maybe it's just because of the foundation date. If I start a company on August 1st, I would like its FY starts on that date too, in order to track my first whole year. Would be quite useless to finish my year on December, after just five months. I want to have data of my first year after a twelve months activity.

In addition to the company-specific annual business cycle reasons and company-specific historical reasons mentioned in the other answers, there is another reason.

Accounting firms tend to be very busy during January (and February and March) when most companies are closing and auditing their calendar-year books. If a company chooses its fiscal year to end at a different time of year, the accounting firms are more available, and the auditing costs might be lower.

My grandfather owned a small business, and I asked him that very question. His answer was that year-end closeout is very time-consuming, both before and after EOY (end of year), and that they didn't want to do all that around Christmas and New Year.

Every day is the end of a year

The Earth is at the same point in its orbit from where it was a year ago every single instant of every single day.

Choosing which one to observe as “the end of the year” (calendar or fiscal) is completely arbitrary. 31 December as the end of the year was adopted by Julius Caesar when he introduced the Julian colander, however, most provinces continued to observe the old New Year in March and places outside the Empire naturally ignored it.

Britain and its colonies continued to observe New Year at the end of spring on 24 March until it adopted the Gregorian calendar in 1752. However, 5 April remains the end of the Financial year (because 24 March 1752 Julian was 5 April 1752 Gregorian) for private businesses and individuals, however, government accounting years end on 31 March.

Businesses adopt the financial year that suits their operations.

Many countries do not end the financial year on December 31

Canada is 31 March. Australia is 30 June. The United States is 30 September. The United Kingdom has two as discussed above.

Business with cyclical revenues usually end at the end of one of those cycles

For example, most retail outlets have strong weekly cycles so many end their financial year at the end of the week. This means that some years have 52 and some have 53 weeks but that still gives more accurate accounts than ending one of Wednesday and the next on Friday.

Seasonal business end at the end of the season

Many sporting clubs and businesses have a winter season (e.g. most football codes) or a summer season (e.g. cricket). It makes no sense to end the financial year in the middle of the season. Even year round sports (e.g. tennis) have seasons and end their fiscal year at the end of one of those.

Similarly, academic institutions end their financial year to coincide with the academic year.

Foreign subsidiaries usually adopt their parent’s fiscal year

Because their accounts have to feed up into the parent’s accounts.