Legal Entity Configurator - Why?

In Oracle Ebusiness Suite 11i, the Legal Entity is tied closely to a set of books and operating Unit, so your Legal Structure has to be defined in the way you set up your apps partitions (OU, Set of Books etc.). In R12 financials breaks away from that with the introduction of the Legal Entity Configurator allowing you to model your Legal Structure separately from the partitions in your ERP system. Then you mark certain items with an owning LE, rather than use the OU or set of books to derive the LE. So let’s see what this buys you.

Let’s first look at what we map Legal Entities to

1. Accounting Structures - Balancing Segment Values and Ledgers
2. Tax Rules in eTax - Who I am and where I am registered/located determines what tax I need to pay
3. Bank Account - Who owns that bank account and the cash in it
4. Payables and Receivalbes Invoicing - the owner of that transaction, sometimes referred to as LE stamping
5. Intercompany Accounts and Intercompany Processing Rules

There are a number of features that you get from this, probably the biggest is tax, the new eTax module in in R12 allows very flexible definition of tax rules, based on the Legal Entites and the tax registrations. It makes your tax calculation and reporting a breeze - at least that is what the eTax development team tell me - I have no reason to doubt them, but I am not an expert in this product so I’m not going to try and give details here.

Intercompany is obviously a big feature, we now base the Intercompany rules on the From (transacting or Initiating) LE and the To (trading partner or Recipient) LE, which not only allows more realistic rules, but provides us with the mapping we need to give you the neat Interactive Reconciliation Reporting.

Also on the Intercompany Front it allows us to define a couple of important rules. Firstly we can define Intercompany Exceptions, that is for LE x, I might want to state that it should not do Intercompany with y and z. Secondly I can set a Legal Rule to tell me when there is a Legal requirement for an AGIS trsansaction to generate an Invoice rather than just create GL journals.

Bank Account ownership is now by a LEgal Entity, so we can more easily determine when a cash transaction is crossing a Legal Entity and intercompany accounting is needed.

There are also a large number of Legal reports which have Legal Entity as a parameter, so the numerous reports shipped in R12 will make it easy to the compliance and statutary details you need on each Legal Entity that has to report. The Oracle Financials globalization products ship the majority of these reports.

For more details on these features, you should start with the Release Content Document, the Functional Upgrade Guide, The Financials Implementation Guide and the product User Guides.  See this post of useful Oracle Financials resources