4–4–5 calendar

The 4–4–5 calendar is a method of managing accounting periods, and is a common calendar structure for some industries such as retail and manufacturing.

The 4–4–5 calendar divides a year into four quarters of 13 weeks grouped into two 4-week "months" and one 5-week "month". The grouping of 13 weeks may also be set up as 5–4–4 weeks or 4–5–4.

When this type of calendar is in use, reports with month-by-month comparisons or trends are flawed as one month is 25% longer than the other two. It could still compare a period to the same period in the prior year, or use week by week data comparisons.

Its major advantage over a regular calendar is that the end date of the period is always the same day of the week, which is useful for shift or manufacturing planning as every period is the same length.

A disadvantage of the 4–4–5 calendar is that it has only 364 days (7 days x 52 weeks), meaning a 53rd week will need to be added every five or six years: this can make year-on-year comparison difficult.

52–53-week fiscal year

The 52–53-week fiscal year is a variation on the 4–4–5 calendar. It is used by companies that desire that their fiscal year always end on the same day of the week. Any day of the week may be used, and Saturday and Sunday are common because the business may more easily be closed for counting inventory and other end-of-year accounting activities. There are two methods in use:

Last Saturday of the month at fiscal year end

Under this method the company's fiscal year is defined as the final Saturday (or other day selected) in the fiscal year end month. For example, if the fiscal year end month is August, the company's year end could fall on any date from August 25 to August 31. In particular, the last fiscal week is the one that includes August 25 and the first fiscal week of the following year is the one that includes September 1. In this scenario, fiscal years would end on the following days:

  • 2016 August 27
  • 2017 August 26
  • 2018 August 25
  • 2019 August 31
  • 2020 August 29
  • 2021 August 28
  • 2022 August 27
  • 2023 August 26
  • 2024 August 31
  • 2025 August 30
  • 2026 August 29
  • 2027 August 28
  • 2028 August 26
  • 2029 August 25
  • 2030 August 31
  • 2031 August 30

The end of the fiscal year moves one day earlier on the calendar each year (or two days when there is an intervening leap day) until it would otherwise reach the date seven days before the end of the month (August 24 in this case) or earlier. At that point it resets to the end of the month (August 31) or earlier and the fiscal year has 53 weeks instead of 52. In this example the fiscal years ending in 2013, 2019, and 2024 have 53 weeks.

Saturday nearest the end of month

Under this method the company's fiscal year is defined as the Saturday (or other day selected) that falls closest to the last day of the fiscal year end month. For example, if the fiscal year end month is August, the company's year end could fall on any date from August 28 to September 3. In particular, the last fiscal week is the one that includes August 28 and the first fiscal week of the following year is the one that includes September 4. In this scenario, fiscal years would end on the following days:

  • 2016 September 3
  • 2017 September 2
  • 2018 September 1
  • 2019 August 31
  • 2020 August 29
  • 2021 August 28
  • 2022 September 3
  • 2023 September 2
  • 2024 August 31
  • 2025 August 30
  • 2026 August 29
  • 2027 August 28
  • 2028 September 2
  • 2029 September 1
  • 2030 August 31
  • 2031 August 30

The end of the fiscal year moves one day earlier on the calendar each year (or two days when there is an intervening leap day) until it would otherwise reach the date four days before the end of the month (August 27 in this case) or earlier. At that point the first Saturday in the following month (September 3 or earlier in this case) becomes the date closest to the end of August and it resets to that date and the fiscal year has 53 weeks instead of 52. In this example the fiscal years ending in 2016, 2022, and 2028 have 53 weeks.

The 52–53 week method is permitted by generally accepted accounting principles in the United States, by US Internal Revenue Code Regulation 1.441-2 [1] (IRS Publication 538).,[2] as well as the International Financial Reporting Standards.[3]

References
  1. "26 C.F.R. § 1.441-2". JUSTIA.
  2. "IRS Publication 538, Accounting Periods and Methods".
  3. IAS 1 Presentation of Financial Statements

See also
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