R12 Legal Entity configurator

Architectural Changes in R12 Financials

Legal Entity Ledger Sets Accounting Engine(SLA) Transaction Based Taxes(EBTAX) Intercompany Accounting (AGIS) Multi-Organization Access Control(MOAC)

Relevance of LEGAL ENTITY

Organization Modeling

 Organization Modeling
Business Group

GRE/LE

Legal Entity

Ledger

Operating Unit

BSV

Inventory Org

 Organization Modeling
Legal Entity in 11i

Reporting Entity

SOB

BSV

GDFs GRE/LE System Options Belgium VAT Reporters

Profile Options

Operating Unit

Brazilian Companies

 Organization Modeling
Legal Entity in 11i
LE , GRE/LE, OU and SOB were tightly coupled. Global Financial Structure was 1:1:1. Problem in accounting, transaction flows and compliance when the legal rules and business operations were not monolithic or top-down.
System Options GDFs

Reporting Entity

SOB

BSV

GRE/LE

Belgium VAT Reporters

Profile Options

Operating Unit

Brazilian Companies

New design in R12

Legal Entity The Reality

Legal Authorities Countries, States, Local, Agencies, Taxation, Registrars, Regulators... Regulates Complies
Subsidiary Public Company Company (regional parent) Public Company (ultimate parent)

Subsidiary Company (business parent)

Legal Entities Registered Companies, Funds, Partnerships Inc. LLC. Ltd. SA. GmBH. Etc. exist in the outside world Managed & analyzed by Management Orgs Divisions, LOBS, Plants, Cost Centers, Whatever = Decision Making Tags

Subsidiary Company

Subsidiary Company

Subsidiary Company

Subsidiary Company

Subsidiary Company

Parent companies (LEs) own or control subsidiaries (LEs) LEs create commercial transactions

Legal Entity The Reality

What LE Means ? What R12 tried to address ?

LEs pay TAX Need Tax Registrations Trade between LEs need Intercompany. LEs own money and bank accounts. LEs file the accounts and take care of accounting. LEs comply with whatever need compliance : Legal in LE.

Addresses, Officers, etc. Enabled First Party stamp Added Establishments: map Registrations to Authorities GRE/LE not touched Authorities as TCA parties LE Configurator

New structure in R12

 Organization Modeling
Legal Entity Architecture (LEA) in R12

11i Link

Bank Account

Legal Entity
Not in R12

Operating Unit

Inventory Org Business Group

Ledger

 Organization Modeling
LEA in R12

Bank Account

Legal Entity

11i Link Not in R12

Operating Unit

Releases OU as a surrogate for the real world Legal Entity OU retains is primary role in managing user access LE now manages local jurisdiction requirements

Inventory Org

Business Group

Ledger

LE Relationship with Accounting Structure and OU

Accounting Structure
In GL, LE is mapped to Ledger and BSV

Operating Unit
No Direct Relationship between LE and OU Relationship is derived from OU assigned to Ledger and LE mapped to Ledger

LE Relationship with Accounting Structure and OU

Accounting Structure
In GL, LE is mapped to Ledger and BSV

Legal
Legal Entity

Establishment

Operating Unit
No Direct Relationship between LE and OU Relationship is derived from OU assigned to Ledger and LE mapped to Ledger
Business
Operating

Accounting
Transactions

Ledger (SOB)

BSV

Unit

LE Design - Models
1:Many
LE are mapped to the Balancing Segment Value (BSV, aka Company code) within a Ledger, so multiple LE are accounted for in a ledger. An OU will have one Ledger assigned so transactions for many LE are processed and accounted in a single OU

1: 1: 1
A single LE is mapped to a Ledger An OU will have one Ledger assigned Therefore an OU only has one LE (that means it is easy to derive the LE given the OU)

What Model Should I use ?

 That Depends on where the LE is registered The 1:M model is recommended and preferred in the US, the 1:1:1 model is recommended for most non US regions.

How to Set Up Legal Entity ?

Legal Entity Configurator

Legal Entity Configurator is the central place to

Setup and Maintain:
Legal Entities Establishments Registrations Jurisdictions Legal Authorities Legal Addresses Legal Contacts

Setup and Maintain Legal Associations

Map Establishments to BSVs in a Ledger. Map Establishments to OUs, Inv Orgs, and Business Locations to enable tax calculation.

Setup and Maintain History

Maintain history of Registrations for comparative reporting and analysis.

Key Concepts

First Party Legal Entity (LE)

Legal Entity of the Deploying Company. Initiates and Owns Transactions. It can own property, trade, repay debt, pay taxes and account for themselves.

Establishment
Building block of a Legal Entity. 100% owned and controlled by the Legal Entity. Required for registrations within local level Jurisdictions.

Legal Authority
Legal body in charge of enforcing legislation, collecting fees/taxes and making financial appropriations.

 Key Concepts

Jurisdiction
Is a formulation of a legislative category and territory to which legal rules are grounded.

Legal Associations
Centralized repository and a common mechanism for maintaining associations between business entities (BSVs, OUs, etc) and legal constructs (legal entities, establishments).

Default Legal Context

One of the Legal Entities sharing the Ledger will be stored on the Operating Unit (OU) when the OU is created. This LE will provide any downstream process with a DLC, which will act as a proxy for the owning LE.

Legal Entity Stamping

Stamping is the identification and recording of the first party legal entity for the given transaction. The first party legal entity is the legal entity that owns the transaction.

Set Key Profile Options

Default Country
This profile option determines the default value for the Territory in the Create Legal Entity page
Profile Value
Country Name

Description
This will be the default Territory in the Create Legal Entity page. For example, United States.

Set Key Profile Options

LE: Generate Legal Entity Identifier This profile option determines whether the Legal Entity Identifier is generated automatically or entered manually.

Profile Value

Description
If this option is set to Yes, the Legal Entity Identifier is generated automatically based on the International Organization for Standardization (ISO) code of the Country of Registration, plus the Registration Number (of the Identifying Jurisdiction) which qualifies an entity to be a Legal Entity in that particular territory. If this option is set to No, the user must enter the Legal Entity Identifier manually.

Yes

No

Set Key Profile Options

HZ: Generate Party Number
This profile option determines whether the Organization Number is generated automatically or entered manually.
Profile Value
Yes

Description
If this option is set to Yes, the Organization Number is generated automatically. If this option is set to No, the user must enter the Organization Number manually. The Main Establishments Organization Number will be the Legal Entity Organization Number appended with ETB.

No

Set Key Profile Options

LE: Change Affectivity
This profile option determines whether the Change Affectivity Region is enabled and displayed in the Update Registrations page .
Profile Value
Yes

Description
If this option is set to Yes, the Change Effectivity region is displayed in the Update Registrations page and the user can enter an effective from date as well as comments for the change. If this option is set to No, the Change Effectivity region is not displayed in the Update Registrations page.

No

Legal Entity Setup Process

Step 1: Enter Legal Information

The Territory chosen sets the context of the information required

Activity Classification

Legal Entity Setup Process

Step 1: Enter Legal Information

These are required attributes for a French Territory

Legal Entity Setup Process

Step 2: Enter Detail Main Information
Automatically generated LE Identifier and Org Number

Registration Number is the SIREN and EIN/TIN Numbers

Step 2: Enter Detail Main Information

Legal Entity Setup Process

Legal Entity Setup Process

Step 2: Enter Detail Main Information

Ends a Legal Entity

eTax Attributes

Legal Entity Setup Process

Step 3: Enter Legal Entity Registrations

Jurisdiction and Legal Authority

Functions such as income tax declaration

Legal Entity Setup Process

Step 3: Enter Legal Entity Registrations

Identifying Flag

Legal Entity Setup Process

Step 4: Enter Contact Information

Step 5: Add/Review Intercompany Exceptions

Legal Entity Setup Process

When adding an Intercompany Exception, a legal association is created between the legal entity that is being created/updated and the selected legal entity.

Legal Entity Setup Process

Step 6: Review

The History subtab displays any changes that have been made to the Legal Entitys Registration.

Legal Entity Setup Process

Step 6: Review

Main Establishment Flag

Affects of LE in R12

Cash Management (Bank) Receivable (Transaction and Receipt) Payables (Invoice and Payment) LE and TCA

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