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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
GRE/LE
Group

Legal Entity Operating


Ledger BSV
Unit

Inventory
Org
Organization Modeling

Legal Entity in 11i

Reporting
SOB BSV
Entity

GDFs

Belgium VAT
GRE/LE
Reporters
System
Options

Profile Operating Brazilian


Options Unit Companies
Organization Modeling

Legal Entity in 11i

LE , GRE/LE, OU and SOB were tightly


coupled. Reporting
SOB BSV
Entity
Global Financial Structure was 1:1:1.
Problem in accounting, transaction flows
GDFs
and compliance when the legal rules and
business operations were not monolithic GRE/LE
Belgium VAT
Reporters
or top-down. System
Options

Profile Operating Brazilian


Options Unit Companies
New design in R12
Legal Entity The Reality

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

Legal Entities
Registered Companies, Subsidiary Subsidiary Subsidiary
Company Company Company
Funds, Partnerships
Inc. LLC. Ltd. SA. GmBH. Etc.
exist in the outside world
Subsidiary Subsidiary
Company Company
Managed & analyzed by
Parent companies (LEs) own or control subsidiaries
Management Orgs
(LEs)
Divisions, LOBS, Plants,
Cost Centers, Whatever = LEs create commercial transactions
Decision Making Tags
Legal Entity The Reality
What LE Means ? What R12 tried to address ?

LEs pay TAX Need Tax Registrations Addresses, Officers, etc.


Trade between LEs need Enabled First Party stamp
Intercompany. Added Establishments: map
LEs own money and bank accounts. Registrations to Authorities
LEs file the accounts and take care of GRE/LE not touched
accounting. Authorities as TCA parties
LEs comply with whatever need LE Configurator
compliance : Legal in LE.
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

11i Link
Bank Legal Operating
Account Entity Unit
Not in R12

Releases OU as a surrogate for the real


world Legal Entity
OU retains is primary role in managing
user access Inventory
LE now manages local jurisdiction Org

requirements
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 Legal

In GL, LE is mapped to Ledger Establishment


Legal

and BSV Entity

Operating Unit
No Direct Relationship Accounting
between LE and OU
Relationship is derived from Transactions Ledger
(SOB)
BSV

OU assigned to Ledger and LE


mapped to Ledger
Business

Operating
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 Description

This will be the default Territory in the Create Legal Entity page. For
Country Name 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
Yes
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
No
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


If this option is set to Yes, the Organization Number is
Yes
generated automatically.
If this option is set to No, the user must enter the
Organization Number manually. The Main Establishments
No
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


If this option is set to Yes, the Change Effectivity region is
displayed in the Update Registrations page and the user can
Yes
enter an effective from date as well as comments for the
change.
If this option is set to No, the Change Effectivity region is
No
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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