Saturday, February 26, 2011

R12 Legal Entity Configurator

The Legal Entity Configurator allows you to define legal entities and establishments in the Oracle system to achieve legal compliance for business activities handled by the Oracle E-Business Suite.

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.

A Legal Entity is an entity identified through the registration with the legal authority. A Legal entity represents a legal company for which you prepare fiscal or tax reports. You assign tax identifiers and other Legal entity information to these types of organizations.
Legal Entities have the right to:
•Own property (assets, inventory, receivable, other LEs)
•Trade (borrow, sell, buy, incur expenses, employ)

Responsibility to:
•Repay debt (liabilities, equity)
•Pay Taxes
•Account for themselves (legal reports, audits) .
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

The Features for Legal Entity are:
1.Legal Entity Setup
2.Establishments Setup
3.Legal Entity Search
4.Legal Authorities and Jurisdictions and
5.Legal Associations

Legal Entity setup : Is the main component within Oracle’s Legal Entity Solution to meet the enterprises’ global Legal requirements. To be able to operate, a Legal Entity may be required to register with different Legislative Authorities depending on the Legal Entity’s activity and locations in order to comply with the law in the territory of operation. Users will use the Registration User Interface pages to create registrations for a Legal Entity in the Oracle System. The Registration User Interface will enable users to enter required registration related information that is needed for legal compliance in a given Oracle Applications instance.

Establishments are made up of a Main Establishment and additional Establishments. Conceptually, the Legal Entity and Main Establishment are tightly coupled. Therefore, every Legal Entity must have a Main Establishment. Whenever a Legal Entity is created, a Main Establishment will automatically be created. A main Establishment is always located in the same Legal Entity’s country. Legal Entities may or may not have additional Establishments.

Additional Establishments are required only in countries where other Legal Entity location needs to register with legal authorities (e.g. India, Brazil, Germany). Some Establishment attributes are required to provide information for current functionality (e.g. Registration Number- SIRET for DAS2 in France). Additional Establishments may or may not be located in the Legal Entity’s country. Main Establishments as well as additional Establishments may follow different set of rules if they do business in different activities or are located in different areas.

Legal Entity Search page : The purpose of the Search Page is to manage Legal Entities, Establishments, and Parties. In order to avoid duplication, users can identify existing Parties of type Organization and update them to be Legal Entities or Establishments.

Users will be able to:
•Update existing Legal Entities or Establishments
•Update an existing Organization Party to be a Legal Entity or a Establishment
•Configure a Trading Community Architecture Party type of Organization as a Legal Entity or Establishment.

The Legal Entity Search Page only displays Trading Community Architecture (TCA) parties of type “Organization.”

All Legal Entities must be registered against a Jurisdiction that is governed by a Legal Authority. The Jurisdiction is a formulation of a legislative category and territory to which legal rules are grounded. The Legal Authority is an executive power that operates within the jurisdiction to enforce legal rules, collect fees/taxes, and make financial appropriations within the territory. In order to support the legal world on which the legal entity is founded, both the legal authority and jurisdiction is clearly defined as part of the Legal Entity Solution.

Legal Associations is part of the Legal Entity Solution which consolidates and provides a centralized solution for Legal Entity related data in Oracle Applications. Various processes like Tax calculation and intercompany transaction processing are dependent on the knowledge of the owning Legal Entity or Establishment. Given that the legal context is not directly stated in Applications transactions today, Legal Associations provides a method to derive the Legal Context by building associations between business and accounting information that are available on transactions and Legal context. Legal Associations will also provide the ability to build associations between Legal Contexts.

A legal entity is the organization unit level at which you report taxes and maintain the corporate banking relationships. The LEGAL_ENTITY_ID column is added to the transaction tables in 12, allowing the ability to track transactions at a Legal Entity level. In R12, you assign a Legal Entity to a Ledger instead of to a Set of Books. It is recommended that you assign one (or more) balancing segment values in your chart of accounts to a legal entity.

Territory:
The territory where the legal entity is registered. This list displays territories at the country level and shows only territories for which the identifying jurisdiction has been defined. Therefore, the territory determines the identifying jurisdiction to which the legal entity needs to register. The territory also determines the context for the information that needs to be displayed in the General Information region. For Canada the BIN number is one such field.

Organization Number:
The organization number is a number used to identify organizations. This field is displayed only when the HZ: Generate Party Number profile option is set to No. In this case, the main establishment organization number is built as a concatenation of the legal entity organization number and ETB (establishment). Otherwise it is not displayed and is generated automatically. For example, if the legal entity organization number entered is 12536, the establishment's organization number will be 12536ETB.

Legal Entity Identifier:
The identification number used to uniquely identify the legal entity. It is displayed only when the LE: Generate Legal Entity Identifier profile option set to No and you must enter it manually. 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.
Example:
Territory: Singapore
ISO Country Code: SG
Registration number of the identifying jurisdiction (RCN number) = 23231 (this is a user enterable field)

If the profile option is set to Yes, the legal entity identifier will be SG23231, otherwise you are required to enter the legal entity identifier manually. If you enter an identifier that is not unique, an error message will be displayed.

Registration Number:
The identifying jurisdiction determines the prompt for the registration number (in the U.S., the EIN/TIN). The Establishment registration prompt is displayed if it is defined for the identifying jurisdiction. In this case the main establishment is created with this registration number. The registration number must be unique within a jurisdiction.

Legal Address:
A Legal Address is the address a legal entity uses to register with a legal authority. A legal entity may use different addresses for different authorities and hence, may have more than one registered address. This legal address must be located within the territory governed by the legal authority.

Oracle Legal Entity Configurator has adopted the use of the HR Address formatting and validation Model

Place Of Registration: Optionally enter the place of the legal entity registration.
Inception Date Optionally enter the date of legal entity registration (creation). It can be on or before the system date and on or after legal entity's inception date but must not be a future date.

Source: My OracleSupport:
Note:396752.1Oracle Legal Entity Configurator Documentation Resources, Release 12
NOTE:1104887.1 - How to Setup a Legal Address Using HR Address Formats in R12 Legal Entity Configurator

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