Oracle R12 Legal Entity Concepts
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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 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 Establishment’s 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 Entity’s 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
Join our growing Network at www.OracleERP.org
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 Establishment’s 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 Entity’s 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
Join our growing Network at www.OracleERP.org
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