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

Legal Entity

GRE/LE

Operating
Unit

Ledger

Inventory
Org

BSV

 Organization Modeling
Legal Entity in 11i

Reporting
Entity

SOB

BSV

GDFs
GRE/LE

Belgium VAT
Reporters

System
Options

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

Reporting
Entity

BSV

GDFs

business operations were not monolithic

or top-down.

SOB

GRE/LE

Belgium VAT
Reporters

System
Options

Profile
Options

Operating
Unit

Brazilian
Companies

New design in R12

Legal Entity The Reality

Public Company
(ultimate parent)

Legal Authorities
Countries, States, Local,
Agencies, Taxation,
Registrars, Regulators...
Regulates

Complies

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
Public
Company
Company
(regional
parent)

Subsidiary
Company

Subsidiary
Company
(business parent)

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 ?

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.

What R12 tried to address ?

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

Operating Unit
Not in R12

Inventory Org
Business
Group

Ledger

 Organization Modeling
LEA in R12

Bank
Account

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

Legal
Entity

11i Link

Operating
Unit

Not in R12

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

Accounting
Transactions

Business
Operating

Unit

Ledger
(SOB)

BSV

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

Description

Country Name

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

Yes

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.

No

If this option is set to No, the user must enter the Legal
Entity Identifier manually.

Set Key Profile Options

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

Description

Yes

If this option is set to Yes, the Organization Number is

generated automatically.

No

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.

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

Description

Yes

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.

No

If this option is set to No, the Change Effectivity region is

not displayed in the Update Registrations page.

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

Legal Entity Setup Process

Step 2: Enter Detail Main Information

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

Legal Entity Setup Process

Step 5: Add/Review Intercompany Exceptions

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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