Calendarization definition
/What is Calendarization?
Calendarization involves spreading the recognition of a transaction over more than one reporting period. This is usually done on a consistent basis over time. However, if the consumption of an expenditure is uneven over time, then the associated calendarization can be designed to charge it to expense in differing amounts per month to match the consumption level, such as half of the total amount in the first month and one quarter in each of the following two months.
Calendarization in Budgets
Calendarization is commonly used in the formulation of a budget, where revenues and expenses are spread across the full range of periods used within a budget. It is quite possible that actual revenues and expenses will vary from the monthly allotments, but the expectation is that the actual experience of the firm over the full period of the budget will approximately match the budget.
Calendarization in Comps Analysis
Calendarization in comps (comparable company) analysis is the process of adjusting a company's financial data to align with a standard calendar year, typically ending on December 31, to ensure consistency and comparability across peer companies. Since companies may have different fiscal year-ends (e.g., March 31 or September 30), calendarization involves prorating financial figures—such as revenue, EBITDA, or earnings—so that all companies in the analysis reflect performance over the same 12-month period. This adjustment allows analysts to make more accurate comparisons of financial metrics and valuation multiples across companies, removing distortions caused by differing fiscal periods.
Example of Calendarization
Here are several examples of calendarization:
Insurance expense. A company pays for a year of property insurance in advance, costing $60,000. The firm elects to calendarize the transaction by initially recording the payment as a prepaid expense and then spreading the expense recognition for the payment over the entire year, at a rate of $5,000 per month.
Advertising. A company pays $24,000 for an advertising campaign that will span six months. Management decides to calendarize the transaction by initially recording the expenditure as a prepaid expense and then spreading the related expense recognition over the six-month term of the ad campaign at a rate of $4,000 per month.