Overview of Enterprise Structures in Oracle Fusion Applications

This article provides an overview of Enterprise Structures in Oracle Fusion Applications, mainly focused on the relationship of the Enterprise, Legal Entity and Business Unit. It also provides some examples gathered from real-life scenarios the author has encountered.

Enterprise Structure

Business' enterprise structure may differ on the basis of industry, geography or statutory requirements. The main driver of an enterprise structure would be any legal requirements and reporting it has to adhere to. Planning how the enterprise structure would be is highly critical. Below is a quick graphical example of an Enterprise named "Vision Corporation":

"Vision Corporation" operates in multiple countries such as United States, France, United Kingdom and Japan. By law, they are required to report their financial earnings in different accounting methods/conventions. Therefore, a good strategy would be to create legal entities by country:

Enterprise	Legal Entity	Accounting Convention
Vision Corporation	Vision US	US Generally Accepted Accounting Principles (GAAP)
	Vision France	International Accounting Standards (IAS)
	Vision UK	International Financial Reporting Standards (IFRS)
	Vision Japan

Each of these Legal Entities have Business Units (BU) under it that carry out day-to-day operations. Focusing into Vision US, it has 2 Business Units, namely: "US1" and "US2". However, Vision US also has a third Business Unit called "Corporate BU" that is shared with all Legal Entities.

This "Shared Services" Business unit can carry out processes for all Legal Entities (such as Procurement and Payments). This Shared Service strategy has a lot advantages such as discounts on purchasing and payments and for overall simplification of process.

Why can't the Shared Service BU be represented as a Legal Entity?

The reason for this is because the Shared Service BU doesn't incur transactions of its own and only provides a service to other Legal Entities and thus, is ineligible to be called a Legal Entity.

Legal Entities

By definition, a Legal Entity is an organization that

1. Incurs financial transactions such as invoices, receipts, payments, etc.
2. Makes purchases and owns the assets (both physical and financial) of the Enterprise
3. Is lawfully registered and recognized as a company or a related entity
4. Pays tax to the government

Each Legal Entity has a separate legal identifier and therefore conducts different aspects of a business. The transactions being carried out by Legal Entities are then accounted to a Business Unit for reporting detail purposes.

Transactions of a Legal Entity are then recorded to a Ledger for statutory reporting (more on this later.)

Business Units

Below are the functions of a Business Units:

1. Security
2. Set ID assignment
3. Reporting
4. Transaction Processing

Each transaction of a Legal Entity should be accounted to a Business Unit. Setting up Business Units need to be planned carefully. Some considerations would be the required Financial Reports, the detail of these reports and the departmental hierarchies of the organization.

Below are some strategies and suggestions on setting up Business Units:

1. Setting up BUs per Industry or Line of Business (LOB) 

This would apply to a large enterprise with multiple Legal Entities and have a well-defined organizational structure. An example would be a large enterprise (Tosh Corporation) that owns multiple companies such as:

Industry	Legal Entity Name
Storage	Tosh Storage
Digital	Tosh Digital
Electronics	Tosh Electronics
Appliances	Tosh Appliances

Under the "Tosh Storage" Legal Entity, there are multiple Lines of Businesses and with this, we can setup the Business Units like below. In addition, the implementer can also setup other Business Units that provide services from within the Enterprise such as Procurement and Financial Services:

Legal Entity	Line of Business	Business Unit Name
Tosh Storage	Flash Memory	Flash
	Solid State Drives	SSD
	Hard Disk Drives	HDD
N/A (Shared)	-	Procurement
	-	Financial Services

1. Setting up a BU per Legal Entity

This would most probably apply to enterprises who operate only in one country. An example would be: a local Shipping enterprise "PhilShip Corp" has setup the Legal Entities and Business Unit with the names:

Enterprise	Legal Entity	Business Unit
PhilShip Corp	PhilShip Freight	Freight BU
	PhilShip Passenger	Passenger BU
	PhilShip Hauling	Hauling BU

Steps in Setting up a Business Unit:

1. Creation of a Business Unit name
2. Assignment of Business Unit functions

• Identifies the business processes the Business Unit will be involved with (ex. Receivables, Payables, Assets, etc.) and assigns the BU to a Legal Entity and a Ledger
• Need to have the IT_SECURITY_MANAGER or Application Implementation Consultant role assigned.

1. Managing Service Provider Relationships 

• Identifies if the BU be enabled to be service provider to transact in behalf of other Business Units
• It can also be used to identify a Singular User under that Business Unit that will transact in behalf of other Business Units. An example would be: User "A" is a Receivables specialist for the whole organization and can transact invoices for all Business Units.

1. Managing Business Unit Set Assignment 

• Used to secure the BU's transactions from other Business Units.
• A good example can be found in the article "Overview of Reference Data Sets in Oracle Fusion Applications"

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