YoY is short for year over year. A year-over-year comparison reads a figure against the same period one year earlier, so both sides sit at the same point in the entity’s own annual cycle. A pattern that repeats every year therefore sits on both sides of the comparison rather than on only one. It is a way of reading a number, not a line item that appears anywhere in the accounts.
The Year-Over-Year Growth Formula
Year-over-year growth is the current period value minus the prior-year same-period value, divided by the prior-year same-period value. The current period value is the measure for the period just closed. The prior-year same-period value is that same measure, on the same basis, for the period holding the same position in the previous fiscal year. The result is a ratio, and it is usually stated as a percent.
YoY growth = (current period value - prior-year same-period value)
/ prior-year same-period valueA Worked Example
Say a firm measures fees billed for its second fiscal quarter and wants that quarter read against the same quarter of the year before.
Fees billed, Q2 this fiscal year $400,000
Fees billed, Q2 last fiscal year $320,000
Change $400,000 - $320,000 = $80,000
YoY growth $80,000 / $320,000 = 25%The denominator is always the older figure, so the same dollar change reads as a larger percentage when the prior-year period was the smaller one. Where the prior-year figure is zero the division is undefined and there is no growth rate to state, and where it is negative the sign of the answer stops carrying its usual meaning.
Which Period the Comparison Anchors To
In financial reporting the periods compared are the entity’s own fiscal periods. Any fixed window can be read year over year, including a twelve-month period ended at an interim date, as long as both sides use the same window in the same position of the annual cycle. The annual accounting period the books are kept on is the fiscal year, and it closes on the fiscal year end. A fiscal quarter runs from that year’s own first month rather than from January. A client with a June year end therefore compares its own Q2 with its own Q2 of the year before, which is not the calendar quarter the label suggests.
For a public filer the year-to-date comparison is not a matter of preference. Item 303(c)(2)(i) of Regulation S-K requires a discussion of material changes in results of operations for the most recent fiscal year-to-date period for which a statement of comprehensive income is provided and the corresponding year-to-date period of the preceding fiscal year (Item 303(c)(2)(i) of Regulation S-K). The interim filing that discussion sits in is Form 10-Q.
Holding the calendar position constant is not the same as taking seasonality out of the reading. A business whose revenues are subject to material seasonal variations should disclose the seasonal nature of its activities and consider supplementing its interim reports with information for twelve-month periods ended at the interim date for the current and preceding years, so that interim results are not taken as fairly indicative of the estimated results for a full fiscal year (APB Opinion No. 28, paragraph 18, the 1973 Opinion on interim financial reporting). The assumption that makes any such interval reportable at all is periodicity.
YoY vs YTD
Year to date fixes the start of the window at the first day of the fiscal year and lets it grow as the year runs, while year over year fixes the length of the window and slides it back a year. They are combined more often than they are chosen between: the interim disclosure duty tests the most recent fiscal year-to-date period against the corresponding year-to-date period of the preceding fiscal year (Item 303(c)(2)(i) of Regulation S-K), which is a year-to-date figure read year over year.
YoY vs Quarter-Over-Quarter
Quarter over quarter compares the most recent quarter with the one immediately before it, so a seasonal swing sits inside the comparison instead of on both sides of it. Either basis is available for the quarterly discussion: the most recent quarter against the corresponding quarter of the preceding fiscal year, or, in the alternative, the most recent quarter against the immediately preceding sequential quarter. A filer taking the sequential route provides that preceding quarter’s financial information in summary form or identifies the prior filing on EDGAR that presents it, and a filer changing the basis of comparison from one period to the next discusses the reason for the change and provides both comparisons in the first filing in which the change is made (Item 303(c)(2)(ii) of Regulation S-K).
Common Questions
Year over year, written YoY or YOY. Beside a figure it says that figure is being measured against the same period one year earlier, rather than against the period immediately before it or against a plan.
No single percentage answers this. A growth rate is read against the base it came from, against the reasons behind the change, and against the entity’s own history. The disclosure rule treats it the same way: where the financial statements reflect material changes from period to period in one or more line items, the registrant describes the underlying reasons for those changes in quantitative and qualitative terms, and the instructions add that the discussion must not merely repeat numerical data contained in the financial statements (Item 303(b) of Regulation S-K).
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