Presentation that outlines all the concepts of Legal Entity in Oracle R12

1. R12 Legal Entity configurator

2. Architectural Changes in R12 Financials
• Legal Entity
• Ledger Sets
• Accounting Engine(SLA)
• Transaction Based Taxes(EBTAX)
• Intercompany Accounting (AGIS)
• Multi-Organization Access Control(MOAC)

3. Relevance of LEGAL ENTITY

4. Organization Modeling

5. … Organization Modeling
Business
GRE/LE
Group
Legal Entity Operating
Ledger BSV
Unit
Inventory
Org

6. … Organization Modeling
Legal Entity in 11i
Reporting
SOB BSV
Entity
GDFs
Belgium VAT
GRE/LE
Reporters
System
Options
Profile Operating Brazilian
Options Unit Companies

7. … 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

8. New design in R12

9. 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”

10. 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.

11. New structure in R12

12. … Organization Modeling
Legal Entity Architecture (LEA) in R12
11i Link
Bank Account Legal Entity Operating Unit
Not in R12
Inventory Org
Business
Group
Ledger

13. … 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

14. 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

15. 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

16. 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)

17. What Model Should I use ?

18. • 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.

19. How to Set Up Legal Entity ?

20. 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.

21. 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.

22. … 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.

23. 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.

24. 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.

25. 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 Establishment’s
No
Organization Number will be the Legal Entity Organization
Number appended with ETB.

26. 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.

27. Legal Entity Setup Process
Step 1: Enter Legal Information
The Territory chosen sets the
context of the information
required
Activity Classification

28. Legal Entity Setup Process
Step 1: Enter Legal Information
These are required
attributes for a
French Territory

29. 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

30. Legal Entity Setup Process
Step 2: Enter Detail Main Information

31. Legal Entity Setup Process
Step 2: Enter Detail Main Information
Ends a Legal
Entity
eTax Attributes

32. Legal Entity Setup Process
Step 3: Enter Legal Entity Registrations
Jurisdiction and
Legal Authority
Functions such as
income tax declaration

33. Legal Entity Setup Process
Step 3: Enter Legal Entity Registrations
Identifying
Flag

34. Legal Entity Setup Process
Step 4: Enter Contact Information

35. 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.

36. Legal Entity Setup Process
Step 6: Review
The History subtab displays any changes that have been made to the Legal
Entity’s Registration.

37. Legal Entity Setup Process
Step 6: Review
Main
Establishment
Flag

38. Affects of LE in R12
 Cash Management (Bank)
 Receivable (Transaction and Receipt)
 Payables (Invoice and Payment)
 LE and TCA

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