Does your business traditionally close on a particular day of the week? If you analyze your profit and loss statements on a weekly basis, as many restaurants do, you may want to consider adopting an accounting period known as a 52-53 week year. Many businesses close their year-ends on the last day of the month. Others have adopted a fiscal year-end and close their years on the last day of a particular month. With a 52-53 week year, your business’ year end will rarely end on the last day of the month. Rather, it will always end on the same day of the week and your business is allowed the option to define the last day as either:
- On the date that the chosen day of the week falls which is nearest to the last day of a calendar month; or
- On the date that the chosen day of the week last occurs in a calendar month.
For example, if an entity reported on a 52-53 week year and adopted a year end that always ended on the last Sunday in December than their year-end would be Christmas Day in 2011 (Sunday, December 25, 2011). If this entity chose to report on the Sunday which falls nearest to the last day of the year then the yea-end date would be New Year’s Day (Sunday, January 1, 2012). As you can see the year end can actually fall in the following calendar year in some years. Your business needs to decide which method to adopt as it cannot go from the last Sunday in the year in one year and then the closest Sunday to the last day of the year in the next. Choose wisely.
The reason for this craziness is to keep comparability simple. There are 7 days in a week, 4 weeks per period, 13 periods per year and usually 52 total weeks in the year. This always confuses me so now let’s do the math: 7 days times 4 weeks times 13 periods equals 364 total days in the year. Because we are a day short each year, and because of that extra day that shows up in February once in a while (aka leap year), every few years there will be a 53 week year and a period of 5 weeks….so much for better comparability in that year.
If you choose to elect such a year, be sure that an election is attached to your income tax return. Be sure to contact your tax professional to help determine if a 52-53 week year is right for your business.