Halfway
As we reach the middle of the year, individuals and companies take time to take stock. Why now?
Time is a human construct, and many dates, markers and aspects of society are scheduled with no relation to our 365-day journey around the Sun. Whether a country focuses on the lunar or solar calendar, or a combination of the two, there tends to be an agreement as to how to organise and report on finances.
The origins of a financial or fiscal year are linked to taxation, which means there’s little reason for it to coincide with the calendar year. With December’s festive season disrupting sittings for the Australian Parliament at the end of December, the decision was made to shift the end date of the financial year to 30 June. This move would also allow time for the government’s annual budget to pass through.
Personal, corporate and government timelines are not always in sync. The UK’s tax year starts on 6 April due to a historical oddity involving the transition from the Julian to the Gregorian calendar in 1800. For politicians and corporations, the focus is on 1 April to 31 March instead.
The U.S. government also structured its fiscal year around elections of new officials, tax collections and budget proposals, starting on 1 October. U.S. companies have some flexibility and can set the end date of this 52 or 53-week period depending on their own needs. Naturally, businesses depending on contracts from government partners might want to coordinate their calendars with the federal one. The Internal Revenue Service requires firms to file quarterly tax payments – but what’s Q1 for a certain company might be Q4 for another.
Selecting specific times could help bolster the balance sheet in some situations. For instance, Walmart’s ($WMT) fiscal year ends on 31 January, capturing the seasonal high sales around Christmas. Apple’s ($APPL) annual results go to the last Saturday of September, close to the event focusing on iPhones and Apple Watches. Most revenues attributed to new or updated products would then fall into the following year.
These regular reports help investors track corporate performance, but some argue this promotes short-term thinking by companies, at the expense of their long-term success. Ideally, they can assess their progress while still keeping an eye on the bigger goals ahead, just as we do with our finances this time of year.
Time is largely what we make of it, and at the halfway point of 2024, there’s still plenty left to make it count.
