|Oracle Financials Implementation Guide|
Part Number E13425-05
This chapter covers the following topics:
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.
Before setting up legal entities, you must complete the following setup steps:
Complete setup for the E-Business Suite
Note: E-Business Tax is dependent on Legal Entities setup to complete its setup. Legal Entities setup is not dependent on E-Business Tax setup.
Optionally set up customer flexfields
Legal entities setup includes the following steps:
Define the Default Country profile option.
Define the LE: Generate Legal Entity Identifier profile option. See: Generating the Legal Entity Identifer.
Define the HZ: Generate Party Number profile option.
Define the LE: Change Effectivity profile option.
Define jurisdictions. See: Creating and Updating Jurisdictions
Optionally define authorities See: Creating and Updating Legal Authorities
Define legal entities. See: Creating Legal Entities.
Assign legal entities to ledgers using the Accounting Setup Manager. See: Accounting Setup Manager
Define additional registrations for legal entities if required. See: Creating Registrations.
Define establishments. See: Creating Establishments.
Define additional registrations for establishments if required. See: Creating Registrations.
Optionally define associated business entities. See: Legal Associations
Optionally define balancing segments for establishments.
Legal Entity Reporting enhances the reporting capabilities of Oracle Applications products by allowing you to report at the legal entity level. Legal reports filter the data based on the legal entity stamped on the transactions (for example, AP Invoices, AR Transactions, etc.) or based on the ledger/balancing segment value that is associated with a legal entity through the Accounting Setup Manager.
When reporting by the legal entity, you can submit the report for all legal entities even if the MO: Security Profile profile option does not include all operating units.
A legal entity is a clearly identified entity, which is given rights and responsibilities under commercial law, through registration with the country’s appropriate legal authority. These rights and responsibilities are enforceable through the judicial system. A legal entity generally has the right to own property and trade, and the responsibility to repay debt and comply with labor law. Legal entities are responsible to account for themselves to company regulators, taxation authorities, and owners according to rules specified in the relevant legislation.
The legal entity belongs to the organization’s own corporate legal structure (enterprise). The legal entity is referred to as the internal legal entity and is the initiator and owner of a given transaction.
Establishment is the generic term used to refer to the building blocks of legal entities. Each legal entity is made up of at least one establishment. These 100 percent owned and controlled entities can also be referred as branches, divisions, establishments (domestic or foreign), inventory organizations, physical locations (for example, manufacturing plants and warehouses). They can be a physical (address) or logical (specific activity) subdivision of the legal entity.
In many countries, establishments need to be registered with local regulatory bodies and may have their own activity codes (such as the NACE code in Europe or the SIC code in the U.S.). Dun & Bradstreet (D&B) have DUN numbers for them as well. They have significant existence (their own address, often supporting local taxes and regulations, in some countries a threshold of number of employee per site), or significant business autonomy (may have their activity code, their own budget, handle their own bank accounts). They are not liable to the outside world (cannot be sued separately in court). They support or represent local or distant registrations of the legal entity. They also represent autonomous business units.
To fulfill registration requirements in some countries at a local level, a legal entity must register a main establishment. For this reason, the main establishment is created automatically when you create a legal entity. While establishments may or may not be located in the country of the legal entity, the main establishment is always located in the country of the legal entity. It is the main site (location) of a legal entity, which supports specific duties related to coordinating business operations and compliance with legislation and reporting needs for the legal entity.
Company registration is done in accordance with a particular legislation (commercial law, income tax law, civil law, company law, etc., depending on the country). It is the backbone of all other legal obligations a company must fulfill. This registration confers the status of legal entity and therefore, the right to do business in a territory (often a country). To comply with the law in the territory of its operations, a legal entity may be required to register with different legal authorities depending on its activity. However, company registration is the first registration to gain official recognition to qualify for other registrations. In some countries, additional registrations may be required for establishments of the legal entity. Registration information can be used on financial statements and legal reports.
Note: Create Registration Page
All legal entities must be registered against a jurisdiction that is governed by a legal authority. A jurisdiction is a combination of the legislative category (labor law, transaction tax law, income tax laws, Insurance law, Securities law, Ground Transportation law etc.) and the physical territory (group of countries, country, state, county, parish) to which legal rules are grounded. A tax jurisdiction is a geographic area where a tax is levied by a specific tax authority, for example, the tax jurisdiction for Goods and Services tax in Singapore is the country of Singapore.
You need to set up jurisdictions before creating registrations because a jurisdiction is required when creating a registration. For some countries, at least one jurisdiction is seeded: the identifying jurisdiction. Users will have the ability to create additional jurisdictions for other registrations.
The identifying jurisdiction is usually the first jurisdiction that the legal entity must register with, in order to be recognized in its territory. Because registrations to this jurisdiction may not be used in Oracle Applications, the identifying jurisdiction may be another jurisdiction that is commonly used within a country.
The registration to the identifying jurisdiction of the legal entity territory is called the identifying registration.
The jurisdiction can also capture the registration code or the name of the registration number. The registration code can then be used as the prompt for the registration number given the context of the jurisdiction. The jurisdiction will also have a start date and end date to show when the jurisdiction is effective and when you can register against the jurisdiction.
When a legal entity or establishment registers with a jurisdiction, there may be a set of functions that it needs to perform, such as payment or income tax declaration. Legal functions can be pre-defined in the jurisdiction to facilitate the registration process. When a registration is created, the specific functions of the jurisdiction can be assigned to the legal entity or establishment. Legal functions that are defined as required on the jurisdiction are by default assigned to the legal entity or establishment during registration.
A legal authority is a governing legal body that operates within a jurisdiction. The legal authority is responsible for enforcing legislation, collecting fees and taxes, and making financial appropriations within a given physical area for a type of law. For example, the Internal Revenue Service is the legal authority for income tax law in the US..
When a legal entity registers under a given jurisdiction, it may be related to a legal authority that is governing in that jurisdiction. Legal authority information is used on legal reports and financial statements in some countries and is determined by the legislation of the jurisdiction. Defining a legal authority is not required for a legal entity to transact and therefore, is not required to create a registration.
A legal authority is associated with a jurisdiction because it has authority over the legal entities that are registered with the jurisdiction. The relationship between the legal authority and the jurisdiction is formed when you create a legal entity registration. Each registration is made to a jurisdiction and each registration can identify an issuing legal authority.
In some countries, the legal authority has executive responsibility over several legislative categories. All of these legislative categories can be assigned to the legal authority. Legal authorities are defined according to your company’s preferences. For example, you can create one authority per office or one authority for multiple offices.
Legal Associations is a set of components that aims to provide a centralized repository and a common mechanism for maintaining associations between business entities (non-legal constructs) and legal constructs (legal entities, establishments) and between just legal constructs. You can also use Legal Associations to maintain associations between balancing segment values and establishments for some countries.
When dealing with associations with establishments, these components are integrated into the Establishment Details page so that you can create associations between various attributes (such as Operating Unit/ Inventory Organization /Inventory Location / Ship-to and Bill-to Location) to establishments. These associations are mainly used by e-Business Tax as a component for tax calculations.
Associations are based on seeded cardinality rules, so it is possible to associate the same operating unit, inventory organization, and location to different establishments, even if they belong to different legal entities.
E-Business Tax needs the establishment information to determine what the imposed tax will be based on information present at the time of entry/creation of the transaction. Determining the establishment is necessary as it is the connecting entity that would determine tax registration and the other relevant details to determine tax.
Use the XLE: Generate Legal Entity Identifier to set the Legal Entity Configurator to automatically generate the legal entity identifier. If you set this profile option to Yes, the legal entity identifier is generated automatically. If you set it to No, you must enter the legal entity identifier manually. The default is No.
Note: Create Legal Entity Page
Use the Legal Entity Configurator to search for existing legal entities, jurisdictions, and legal authorities; create and update legal entities, establishments, registrations, legal addresses, jurisdictions, and legal authorities; and create legal entities from existing organizations.
From this page you can:
View and update the five most recent legal entities created
View and update the five most recent registrations
Search for legal entities by legal entity name or legal entity identifier
Create a legal entity
In the Legal Entities tab, you can use the Legal Entity Simple Search and Advanced Search pages to search for existing legal entities. From these pages you can:
Query on existing legal entities or establishments and update them
Create a new legal entity or establishment
Configure an existing organization to be a legal entity or establishment
The results table at the bottom of the page includes existing legal entities, their establishments, and existing organizations that are not classified as a legal entity or an establishment. A selected organization can be configured as a legal entity or an establishment by navigating to the Organization Details page and using the Configure as Legal Entity or Configure as Establishment buttons.
Create legal entities with minimum required information using the Create Legal Entity page.
If you create a legal entity from an existing organization, the country, organization name, and organization number are defaulted from the organization. In this case, the organization number is not updatable even if the HZ: Generate Party Number profile option is set to No.
When you create a legal entity, the main establishment is created automatically. The legal entity territory, name, address, effective date, and other information are defaulted to the main establishment. The establishment inherits the registration number of the legal entity only if the establishment does not have it own number.
Some of the key fields are:
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.
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.
Note: Oracle Trading Community Architecture User Guide
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.
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: 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 entered.
General Information Region: This region displays the following information:
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.
Additional fields that becomes available in the context of the country: Type of Company, Business Activity, (for example, NACE for Ireland, NAICS for the U.S. (previously was SIC Code), and APE for France), Share Capital, Currency, Fiscal Year End, IBGE City Code and Entity Responsible for Primary Chart of Accounts for Brazil. These attributes are optional and implemented as the Legal Entity Context Information developer flexfield, which is not updatable. The Type of Company and Business Activity fields and seeded LOVs may be named differently in the context of particular territories of the legal entity.
Context Value: Users are allowed to define additional attributes using the Additional Legal Entity Information customer flexfield. The Context Value field is a drop down list that contains context field value names defined for this flexfield. Select an appropriate context to enter additional legal entity information.
Create establishments with minimum required information using the Create Establishment page.
If you create an establishment from an existing organization, the organization name and number are defaulted from the organization. The organization number is not updateable in this case, even if the HZ: Generate Party Number profile option is set to No.
If no jurisdictions are set up for the territory selected, the registration information (the registration number and address) is not required and is not displayed. Otherwise, the registration information is required and displayed. Additional establishments are required only in countries where another legal entity location needs to registered with legal authorities (for example, India, Brazil, and Germany). These establishments may or may not be located in the legal entity’s country. Establishments, including main establishments, may follow different sets of rules if they do business in different activities or are located in different areas.
You cannot create a new main establishment from the Create Establishment page. To create a new main establishment, you must create a new establishment, then change the main establishment.
Note: Only the legal entity is stamped on transactions headers. Establishments can instigate, initiate, and control a transaction, but the ownership of a transaction lies with the legal entity. In one transaction, each line can refer to different establishments.
Key fields are:
Territory: The territory in which the establishment is registered. It can be different from the legal entity’s territory. The selected territory determines the jurisdiction to which the establishment needs to register and the context of the information that is displayed in the General Information region. The jurisdiction determines the prompt for the registration number. If there is no jurisdiction for this territory or it has no establishment registration code set up, then the establishment is created without registration information (without a registration record).
Parent Legal Entity: Available only when an establishment is created from an existing organization. Select the parent legal entity to which the establishment belongs.
Organization Number: The organization number is used to identify organizations. It is displayed only when the HZ: Generate Party Number profile option is set to No. Otherwise it is not displayed and is generated automatically.
Registration Number: The jurisdiction determines the prompt(s) for the registration number(s). The establishment registration number prompt is displayed if it is set up for the jurisdiction. If it is not set up or there is no jurisdiction set up for this territory, the Registration Number field is not available. The registration number must be unique within a jurisdiction.
Legal Address: You can create a new address or use an existing one. The legal address must be located within the territory. This field is not available if there is no jurisdiction for this territory or the jurisdiction has no Establishment Registration Code setup.
General Information region:This region displays the following information:
Inception Date: Optionally enter the date of the establishment 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.
Additional fields that become available in context of the country: Type of Company, Business Activity, and Secondary Activity. These attributes are optional and implemented as the Establishment Context Information developer flexfield. This field is not updatable. The Type of Company and Business Activity may be named differently and have different seeded LOVs in the context of a particular territory.
Context Value: Define additional attributes using the Additional Establishment Information customer flexfield. The Context Value field is a drop down list that contains Context Field Value names defined for this flexfield. Select an appropriate context to enter additional establishment information.
Note: Registration, Create Registration Page, and Establishments.
You can configure an existing organization (party) to be either a legal entity or an establishment. To search for organizations that can be configured as either a legal entity or an establishment:
At the Legal Entities Search page, enter your search criteria and set the Transacting Entity field to No or blank to have all the organizations with Legal Type n/a listed.
View the details of the organization you chose.
At the Organization Details page, click Configure as Legal Entity or Configure as Establishment.
Enter required information. For an establishment, select a legal entity in the parent legal entity.
Optionally add additional details to the legal entity or establishment.
Use this page to:
Update/add legal entity information
Create additional or modify registrations for the legal entity
Create establishments for the legal entity
Updating Legal Entities Details
Use the Legal Entities Details page to add and update legal entity details.
Selected fields are:
General subtab: View identifying information, such as the legal entity name, identifier, organization name, organization number, additional legal entity information. You can also end date a legal entity here by entering the end date and view and update transaction tax profile information.
Registrations subtab: View and update registration information.
Establishments subtab: View and update establishment information. From this subtab you can create a new establishment or change the main establishment.
Contact Information subtab: From this subtab, you can view contact information and create, update, and remove contacts and addresses.
Intercompany Exceptions subtab: It is assumed that all legal entities can have an intercompany relationship with any legal entity. This page lists any legal entities that cannot have an intercompany relationship with the legal entity being created or updated. Click Update to add or remove intercompany exceptions. When adding an intercompany exception, a TCA relationship is created between the legal entity that is being created/updated and the selected legal entity.
History subtab: This subtab provides an audit trail of changes to the legal entity's registration, including the effective date the changes were made, administrative information such as the user who made the change, the reference number for the record change, and the reason for the change. This subtab is view only and cannot be updated. In addition, you can personalize the table display as needed (for example, hide the Change By or Effective Dates columns) using personalization. Access to the View History page can be restricted by roles via permission sets.
Note: You can enter effective dates that appear in the History subtab only if the LE: Change effectivity profile option is set to Yes.
Use the Establishments Details page to add and update establishment details
Note: You cannot update the organization number if it was generated automatically.
Use the Establishment Details page to view, add, and update establishment details.
General subtab: View identifying information, such as the establishment name, organization name, organization number, and additional establishment information. You can also end date an establishment and view and update transaction tax profile information.
Registrations subtab: View, create, and update establishment registrations.
Contact Information subtab: From this subtab, you can view contact information and create, update, and remove contacts and addresses.
History subtab: You can view any changes that have been made to the establishment registrations. This subtab is view only and cannot be updated. In addition, you can personalize the table display as needed (for example, hide the Change By or Effective Dates columns) using personalization. Access to the View History page can be restricted by roles via permission sets.
Associated Business Entities subtab: This subtab provides functionality to maintain associations between the following types of business entities and the establishment that is being updated:
These associations are built on the base of the Legal Associations feature and are maintained mainly for purposes of tax calculation.
Balancing Segments subtab: This subtab is available in the context of particular countries, such as France and Brazil. It provides functionality to associate one or multiple balancing segment values (BSVs) to an establishment to meet the legal reporting requirements of these countries (such as DAS2 in France). To assign BSVs to the establishment, make sure that a primary ledger has been assigned to the legal entity. Use the GL Accounting Setup Manager to associate a primary ledger to the legal entity. You can view, add, or end date the BSV association using this subtab. These assignments are built on the base of the Legal Associations feature. The same BSV can be mapped to only one establishment.
Note: Establishments and Accounting Setup Manager.
To create additional registration(s) for legal entities or establishments, use the Create Registration page.
Key fields are:
Jurisdiction: Enter the jurisdiction to which the legal entity/establishment needs to add an additional registration. Use the search icon to select jurisdictions on territories other than the base territory to which the legal entity/establishment is registered.
Registration Number:The registration number prompt is displayed based on the jurisdiction selected. For example: Employer Identification Number (EIN/TIN) may be the registration number prompt that is displayed in the context of the United States Income Tax jurisdiction for legal entities. SIRET may be the registration number prompt that is displayed in the context of the French Income Tax jurisdiction
If the Establishment Registration Code has not been set for the jurisdiction, then the prompt Registration Number is displayed for establishments.
Registration Effective From: Optionally enter the effective start date of the registration. It must be after the inception date of the legal entity/establishment.
Registration Effective To: Optionally enter the effective start date of the registration. It must be before the end date of the legal entity/establishment.
Context Value: You can define additional attributes using the Additional Registration Information customer flexfield. The Context Value field is a drop down list that contains Context Field Value names defined for this flexfield. Select an appropriate context to enter additional registration information.
Additional fields that becomes available in the context of the country: If territory of Legal Entity is Brazil, then system displays the Institution Code field in the General Information region of Registrations page.
Registered Address: Select or create the registered address for this registration. The registered address is limited to the territory of the jurisdiction.
Legal Functions region: The legal entity/establishment may have to perform certain functions, such as payment or reporting. Legal functions are pre-defined in the jurisdiction to facilitate the registration process. Legal functions that are defined as required on the jurisdiction are assigned to the legal entity/establishment registration by default. Optionally add to the registration the legal functions that are not defined as required. Some legal functions may indicate specific legal authorities that are used when the function is performed. An appropriate legal authority can be assigned to each legal function.
Use the Update Registration page to update legal entity/establishment registration information.
This page is similar to the Create Registration page, except that the Update Registration page has the Change Effectivity region that becomes available when the LE: Change effectivity profile option is set to Yes.
Note: Profile Options Overview
Key fields are:
Effective From: Enter the effective from date for the updated registration attribute(s). This date is tracked under the History tab of the legal entity/establishment. It is defaulted to the system date. This field is updatable and must not be a future date.All updated attributes of a legal entity/establishment registration are shown under the History tab of the legal entity/establishment.
Note: Creating Registrations
The main establishment can be changed from one establishment to another. To move a main establishment you must select a replacement establishment. The registrations on the old main establishment will not be transferred to the new main establishment because registrations typically need to be requested again from the legal authority. For some countries, the registrations on the old and new main establishments will need to be re-classified as a result of this change.
In some countries (for example, the U.S. and France), the legal address is the main establishment address. When the legal entity moves its main establishment from one establishment to another, its registered address is modified. The new main establishment must have been created as an additional establishment before this transfer can apply. You select the establishment that will become the new main establishment and enter the date of transfer. The date can be today’s date, a date in the past, or a date in the future.
To change a main establishment:
From the Legal Entity Details page, navigate to the Establishments subtab and click Change Main Establishment .
Enter a start date and select a replacement establishment in the Establishment table. From the start date, the establishment selected becomes the new main establishment. The start date must be within the new main establishment inception date and end date.
If you set End Date Current Main Establishment to Yes then your current main establishment will be closed and become inactive. If you set End Date Current Main Establishment to No, the establishment will still be active but will no longer be a main establishment.
Use this page to maintain addresses that can be selected as legal/registered addresses when you create a legal entity.
In the Setup tab, Jurisdiction subtab, use the Jurisdiction Search page to search for existing jurisdictions.
From this page you can:
Search for jurisdictions by attributes such as name, legislative category, or territory
Navigate to the Create Jurisdictions page and create a jurisdiction with the legislative category you chose
Navigate to the Update Jurisdiction page and update jurisdiction attributes
To create a jurisdiction:
On the Jurisdiction Search page, choose the legislative category in the drop down box next to Create Jurisdiction: Legislative Category and click Go.
On the Create Jurisdiction page, enter the territory, name, and whether or not the jurisdiction is an identifying jurisdiction.
Optionally enter effective dates.
Key fields are:
General Information region:
Identifying: Indicates whether the jurisdiction is an identifying jurisdiction.
Note: You cannot create a legal entity if there is no identifying jurisdiction for the territory
Registration Code: The legal entity or establishment registration codes determine validation of the registration number for some countries. For all countries, the registration number is validated for uniqueness within a jurisdiction. For the identifying jurisdiction the legal entity registration code is mandatory and is always set to Yes for the corresponding Display on Create field. If you enter the establishment registration code, the corresponding Display on Create field becomes mandatory and you can select Yes or No.
Legal functions region:
This region allows you to relate specific legal functions for a given jurisdiction. You select the legal functions in a list of values. In addition, you can choose to display the legal function during the registration process for legal entities and establishments.
To update a jurisdiction:
Search for a jurisdiction and click the update icon to open the Update Jurisdiction page and update the jurisdiction using the same procedure you use to create a jurisdiction.
Use the Create Legal Authorities page to create legal authorities with minimum required information.
To create legal authorities:
Enter the organization name and any other identifying information.
Enter address information.
Key fields are:
Identification Information region
Organization Name: The name of the organization.
Organization Number: This field uniquely identifies internally the organization. It is generated automatically or entered manually, depending on the setting of the HZ: Generate Party Number profile option.
Alias (optional): Enter the alternate name of the legal authority. This field can be used to enter the authority name in a different character set.
Pronunciation (optional): For countries where there is a different character set such as Japan, enter the legal authority name phonetically.
Use the Address region to enter an address for the legal authority. Click on Save and Add Details to create contact persons and/or create additional addresses for other legal authority offices.
To update a legal authority:
Search for a legal authority and click the update icon and update the legal authority using the same procedure you use to create a legal authority.
Navigate to the General subtab and click the Update button to update identification information or to add/remove a legislative category.
Navigate to the Contact Information subtab. You can create/update/remove a contact person in the Contacts region. You can create/update/remove an authority address in the Address region.
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