Is there a reason why it's in this pattern?
The NPD Group internally refers to it as 4-5-4 (as do others), but if you go by the calendar year (January - December), it's 4-4-5.
It's done by lots of retail and merchandising companies throughout the industry as historic precedent.
A key advantage of it is that it maintains the same amount of weekends each month...and since weekends are important in retail, it's important to keep them aligned when looking at monthly comparisons.
Another reason is that businesses report quarterly financial statements.
There are 52 weeks in a year, but 1 quarter = 13 weeks.
So, 4-4-5 / 4-5-4 is a reasonable way to break up each quarter because it's consistent.
Accounting benefits:
· The ability to forecast and plan sales in standard weekly buckets of data.
· A consistent 13 week, 91 day quarter to measure quarter over quarter financial and operating results.
· Within manufacturing companies, it aligns operational forecasts and production schedules to the accounting period thereby facilitating the planning process.
· Accounting for Payroll becomes predictably easier, assuming that the pay week begins on a Sunday and ends on a Saturday.
· Generally, accounting for prepaid and accrual transactions becomes easier and less likely to record accounting errors in the general ledger.
· Assembly of annual sales plan and financial budget becomes easier with consistent predictable periods.
· HR in Accounting departments enjoy a more predictable schedule, month over month, year over year.
Accounting disadvantages:
· One disadvantage of the 4-4-5 calendar is that it has 364 days (7 days * 52 weeks), so approximately every 5 years there will be a 53 week year, which can make YOY comparison difficult.
· To change your year end from an IRS standpoint requires filing the appropriate paper work.
· If you have operations around the globe that need to consolidate into your overall financial results, consideration must be given to the impact of the calendar change for operations in other countries. This will likely cause minor closing adjustments for the 4-4-5 periods versus the statutory reporting periods for these other country operations.
