Monday, December 17, 2007

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


How do I define my Legal Entities? « David Haimes Oracle Intercompany Financials Blog said...

[...] employ people, pay taxes, be sued and simlar. In Oracle Financials Release 12, a whole new product; Legal Entity Configurator, was created to manage them. We allow you to define your real world Legal Entities and then map [...]

AGIS Out of the Box « David Haimes Oracle Intercompany Financials Blog said...

[...] already taken the time to enter your Legal Entites, or maybe they were upgraded from 11i so just kick off our process to classify them all as [...]

Lucas Belter said...


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

David Haimes said...

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

Subashini said...

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

Defining Intracompany Balancing Rules « Rohit Kathuria said...

[...] rules you had in 11i of you are upgrading from 11i. If you don’t want to take advantage of the Legal Entity Configurator product and define Legal Entities and map them to your accounting structure, you can still go ahead [...]