Legal Entity Configurator – Why?

LEIn 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

Author: David Haimes

I'm Senior Director in the Oracle Research and Development Organization, with close to 20 years working in various roles on the development of the Financial Management product suite.  Since the summer of 2016 my focus is exclusively on working with customers and longer-term design work, particularly around next-generation functional and technical architecture. My task is to figure out NOW what the financial management system of the next 3, 5 or more years should look like and start working toward it.  At the moment the majority of my time is spent working on Blockchain or Distributed Ledger Technologies (DLT), leading the effort for all of SaaS applications.  I'm also interested in AI, Machine Learning and new UX and interaction paradigms such as chat bots. I started out in Oracle UK and found my way out to Oracle's Redwood Shores, California HQ in May 2000.  My previous role was product owner for Fusion Accounting Hub, General Ledger, Intercompany and Legal Entity products in Oracle Fusion Financials and eBusiness Suite General Ledger. I have also worked on EMEA Globalizations, Federal and Public Sector Financials, XML Payments and a variety of projects on other products down the years.

12 thoughts on “Legal Entity Configurator – Why?”

  1. Hi,

    my name is Lucas Belter, and I am Oracle Functional Consultant.

    I have some experience with Oracle Intercompany, and lately E-tax of R12.

    I wonder wether E-tax can replace Sabrix or Vertex?

    I dare to think so and I am searching for an answer. there is none on the web, so i Intend to recognize Sabrix, for I know E-tax already.

    Perhaps you could give me an advice.

    I am subscribed to your blog since the fall.

    Lucas Belter

    Like

  2. eTAx can be used instead of (say) Vertex as a repository for all your Tax rules. However, I understand that it also can be integrated with Vertex to import tax info from there.

    Disclaimer: I am not an eTax expert, so I don’t have a lot of details

    Like

  3. Hello,
    i am not finding Kuwait territory on default LOV while creating legal Entity in Accouting Setup Manager in R12.
    Please advice.

    Like

  4. We are using GL in shared mode for Procurement and while defining the Legal Entity we added one BSV to it by mistake and we want to get rid of it. Oracle does not allow us to get rid of it but only has the option to end date it. If we leave the BSV assigned how is that going to impact us. We have just one BSV assigned and at this point of our implementation we have one LE, down the line we will add more LEs.

    Thanks,
    Abhishek

    Like

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