Switching to a financial year: when and how to change your accounting period

The accounting period is normally the calendar year, but under certain conditions a company can switch to a financial year. This change makes sense when the calendar year does not match the real cycle of the business.

What a financial year is

A financial year is an accounting period of twelve consecutive months that does not start in January. Switching to a financial year makes it possible to align the accounting period with seasonality or with the parent company’s accounting period.

This allows the company to close its accounts at a time when its activity is quiet, rather than in the middle of the busiest season.

When the change pays off

The change makes sense especially for seasonal activities, where a year-end close in the middle of the main season would distort the picture of the company’s performance. It is also suitable when the company belongs to a group that uses a different accounting period.

• pronounced seasonality of the business
• alignment with the parent company
• a more logical close of the business cycle

How the switch works

Switching to a financial year requires meeting the statutory conditions and notifying the tax administrator within the prescribed deadline. Without this notification, the change cannot be validly made.

A transitional period arises between the original and the new period, and it may be shorter or longer than a normal year. Separate financial statements are prepared for this period.

What not to forget

The change of period also shifts the deadlines for the financial statements and the tax return. It is therefore important to factor the new deadlines into your planning in advance.

• notifying the tax administrator of the change
• the shift in deadlines for the financial statements and the tax return
• handling the transitional period and its financial statements

Recommended procedure

It is advisable to plan the change of accounting period well in advance and in cooperation with an accountant, who will assess all the implications, including the impact on VAT and other obligations.

Check the specific conditions and deadlines for the current period, as they may change. Always base the decision on the real benefit to the company, not just on the administrative side.

Advantages and disadvantages of the change

The main advantage of switching to a financial year is that the year-end close and the associated work fall into a quieter period. The company thus has more room for thorough closing work.

On the other hand, the change involves administration, a transitional period and the need to adapt internal processes. The change is therefore worthwhile mainly where the benefit is clear and long-term.

• year-end close outside the busiest season
• alignment with the group of companies
• administration associated with the transitional period

Returning to the calendar year

Just as it is possible to switch to a financial year, it is also possible, under set conditions, to return to the calendar year. Here too, deadlines and the obligation to notify the tax administrator apply.

A change of accounting period should therefore not be rushed. It is a decision with a long-term impact, which should be thought through and discussed with an expert in advance.

Impact on internal processes

Switching to a financial year affects not only accounting but also planning, reporting and performance-linked remuneration. The company has to adapt its budgets and internal deadlines to the new rhythm.

It is therefore a good idea to communicate the change within the company as well, not just to the authorities. When everyone knows when the accounting period closes, cooperation on the year-end close runs more smoothly and without unnecessary last-minute pressure.

Related articles: The most common accounting mistakes in small companies, Receivables and payables ledger: how to keep it efficiently, E-invoicing: what it brings to companies in Slovakia.

Frequently asked questions

Can every company switch to a financial year?

The switch is possible if the statutory conditions are met and after notifying the tax administrator. However, it is not suitable for everyone; it pays off mainly for seasonal businesses or for alignment with a parent company. Check the conditions for the period in question.

How long does the transitional period last when switching to a financial year?

The transitional period between the original and the new accounting period may be shorter or longer than twelve months, depending on when the new financial year begins. Separate financial statements are prepared for this period.