Oracle Fusion SaaS offers a comprehensive set of enterprise applications sharing a
single database schema. This means that the applications share several common
data objects, such as master data and reference data. Another set of shared data
are the Enterprise Structures.
Enterprise Structures are the heart of any ERP cloud solution and hence critical in
their strategic impact. Following points highlight some of the reason why Enterprise
structures are so critical to overall solution:
• Enterprise Structures determine how various organization structures are
represented in the applications
• Several Enterprise Structure configuration choices have a more or less
irreversible character and can only be changed be changed at relatively high
cost once they have been used to record business transactions
• Several Enterprise Structure configuration choices have a decisive or
important impact on other application configuration options
This Foundation Design section provides principles and guidelines for configuring
the enterprise structures that will form the basis of the ERP solution for any
Organization. Depending on the level of prescription desired by the business, the
dependency of other application configurations on the enterprise structure and the
degree of irreversibility of the configuration, this HL Design will prescribe target
enterprise structures in terms of design guidelines or as detailed specifications.
Oracle Fusion Applications have been designed to support every enterprise with
three fundamental structures that describe its operations and provide a basis for
reporting.
• Legal
• Managerial
• Functional
In Oracle Fusion, these structures are implemented using the chart of accounts and
organization hierarchies.
Legal Structure
A corporation is a distinct legal entity from its owners and managers. The
corporation is owned by its shareholders, who may be individuals or other
corporations. There are many other kinds of legal entities, such as sole
proprietorships, partnerships, and government agencies. A legally recognized
entity can own and trade assets and employ people in the jurisdiction in which it is
registered. When granted these privileges, legal entities are also assigned
responsibilities to:
•Account for themselves to the public through statutory and external reporting
•Comply with legislation and regulations
•Pay income and transaction taxes
•Process value added tax (VAT) collection on behalf of the taxing authority.
Many large enterprises isolate risk and optimize taxes by incorporating subsidiaries.
They create legal entities to facilitate legal compliance, segregate operations,
optimize taxes, complete contractual relationships, and isolate risk. Enterprises use
legal entities to establish their enterprise's identity under the laws of each country
in which their enterprise operates.
Management Structure
Successfully managing multiple businesses requires that you segregate them by
their strategic objectives, and measure their results. Although related to your legal
structure, the business organizational hierarchies do not need to be reflected
directly in the legal structure of the enterprise. The management structure can
include divisions, subdivisions, lines of business, strategic business units, and cost
centres.
Functional Structure
Straddling the legal and business organizations is a functional organization
structured around people and their competencies. Within any organizations Group
Enterprise Structure design, functional structure will be reflected by HR
Departments and Department trees. The structure is provided in detail in the next
subsection.
This section will cover the following Enterprise Structures in ERP design:
- Enterprise
- Ledgers
o Primary IFRS Ledgers
o Secondary local GAAP Ledgers
- Entities
o Legal Entities
o Branches
o Joint Ventures
- Divisions
- Business Units
- HR Departments
- Inventory Organizations
- Costing Organizations
- Locations
o HR Locations
o Inventory / Project Locations
- Project Units
- Project Organization Hierarchy
In following subsections, the hierarchy of these structures within Enterprise
Structure Design, as well as detailed conceptual descriptions of these structures for
are stated.
In this example, there is one Enterprise (in EBS, it was referred to as the Business
Group). You can only have one enterprise per production instance. There should
NOT be any reason why you would need more than one enterprise unless your
company is truly a conglomerate, such as GE. All an enterprise is a grouping of legal
entities. It really doesn’t do anything else functionality-wise.
The Vision Holding Company is a holding company and a legal entity. It uses
Balancing Segment Value (BSV) 10 for its own transactions and consolidating its
subsidiaries. It operates in the US, Canada, and the UK. It has 4 wholly owned
subsidiaries: US West, US East, Canada, and UK. It shares the same ledger as it’s
two US legal entities.
Note: Logically and conceptually, the Legal Entity is above the Ledger. But for
illustrative purposes, we’re showing the LE below the ledger because the ledger
performs the accounting for the legal entities and can perform the accounting for
multiple legal entities that can share all 4Cs: Chart of Accounts, Calendar, Currency,
and accounting Method.
It has 4 business units: SSC BU in the US performs centralized purchasing for all the
legal entities worldwide. The US BU performs requisitioning and invoicing for both
the US LEs, US West and US East. Canada and UK each have their own business unit
to perform requisitioning and invoicing for them.
Here, the enterprise is comprised of 5 registered companies or LEs, one of which
owns the others and is the top node. These exist in the legal world and have
property rights like “persons”.
3 of the US LEs comply with their mandate to keep books and records by sharing
the American ledger, and each foreign one has its own. The ledgers share a chart
of accounts, and therefore can be combined into one Ledger set for mass
processing in GL, and a single cube for instant reporting.
Routine and repetitive accounts such as Receivables, Inventory, and Payables are
managed by business units established one per ledger in one subledger that ties to
each ledger. The BUs are country management, same as the folks who manage the
ledgers.
Inventory is owned by the legal entities using the ledgers and accounting for
inventory in the subledger is located in inventory orgs.
A shared service procurement business unit procures on behalf of many companies
(LEs) and directs vendors to invoice the appropriate company (companies are
registered LEs which are permitted by law to take up legal ownership of goods and
services, unlike management entities and other unregistered organizations) so that
group/enterprise can take legal ownership appropriately.
