What is the deal with mid-year closing?

A company’s workload is not always the same throughout the year. Seasonal fluctuations are part of it. So, it can make sense to think about the appropriate time for the balance sheet date. A typical example is winter sports facilities: 31 December is in the middle of the season and is rarely chosen as the balance sheet date.

A fiscal year must cover 12 months, but must not correspond to the calendar year. In principle, any date is permissible as the balance sheet date.

A suitable closing date can be chosen at the time of incorporation; a change to a different closing date is also possible at a later point in time. The first application of a new closing date results in a short year – the fiscal year has less than 12 months – or a long year – more than 12 months.

The choice of the balance sheet date has an influence on the accounting: the less business activity the company has on a balance sheet date, the easier it is to make accruals.

Not every reporting date is suitable: For VAT-registered companies, the financial year should end with a quarter. Otherwise, additional accruals and deferrals complicate the financial statements. Wage and social security settlements also lead to more work, as they are tied to the calendar year.