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 US Generally Accepted
Vision US Accounting Principles
(GAAP)
Vision France International Accounting
Standards (IAS)
 Vision UK International Financial
Reporting Standards
Vision Japan
(IFRS)

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

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

Flash Memory Flash
Tosh Storage Solid State Drives SSD
Hard Disk Drives HDD
- Procurement
N/A (Shared)
- 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 Freight Freight BU
PhilShip Corp 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
o 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
o Need to have the IT_SECURITY_MANAGER or Application
Implementation Consultant role assigned.
1. Managing Service Provider Relationships
o Identifies if the BU be enabled to be service provider to transact
in behalf of other Business Units
o 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
o Used to secure the BU's transactions from other Business Units.

Fusion Enterprise Structure & ESC

Enterprise Structure
Enterprise Structure in fusion is a hypothetical structure maintained in the
system to depict the actual working/organization structure of the company. It
has different levels starting from Enterprise to Inventory
organization/Facilities.

Oracle Fusion Applications have been designed to ensure your enterprise can
be modelled to meet legal and management objectives. The decisions about
your implementation of Oracle Fusion Applications are affected by
• Industry
• Business unit requirements for autonomy
• Business and accounting policies
• Business functions performed by business units and optionally, Centralized
in shared service centers
• Locations of facilities

Every enterprise has three fundamental structures, legal, managerial, and

functional, that are used to describe its operations and provide a basis for
reporting. In Oracle Fusion, these structures are implemented using the
chartof accounts and organizations. Although many alternative hierarchies
can be implemented and used for reporting, you are likely to have one
primary structure that organizes your business into divisions, business units,
and departments aligned by your strategic objectives.

Important Points for consideration

• Enterprise Structure is what we call MULTI ORG in EBS

• No Profile Options usage in Fusion like HR: Business Group or HR: Security
Profile
• Enterprise Structure is the basis of Fusion Implementation and decides the
working, reporting, compliance, legal, business, accounting concepts and
models of an organization.

A Typical Enterprise Structure will look like below –

Let’s discuss Enterprise Structure in details

Enterprise

We have a single Enterprise OraFUSIONcloud. In generally, we have single

Enterprise for one Instance.

Legislative Data Group (LDG) — Enterprise is not equal to Business Group

like we have in EBS, but we have LDG in fusions to segregate the employee
information on the country basis serving as business group in directly.

In Fusion default Enterprise is SET UP ENTERPRISE like SET UP BUSINESS

GROUP IN EBS.

ESC – Enterprise Structure configurator

The Enterprise Structures Configurator is an interview-based tool that guides
you through the process of setting up a basic enterprise structure. By
answering questions about your enterprise, the tool creates a structure of
divisions, legal entities, business units, and reference data sets that reflects
your enterprise structure.

After you create your enterprise structure, you also follow a guided process
to determine whether or not to use positions, and whether to set up
additional attributes for jobs and positions. After you define your enterprise
structure and your job and position structures, you can review them, make
any necessary changes, and then load the final configuration

At the end of the process a report is generated – the inappropriately named

“Technical Summary Report”. We use this report to validate the design with
the customer. Once agreed, there is a final ‘load’ process in which ESC loads
the prototype design into the mainline database tables.

The process really streamlines the setup and saves a lot of manual,
repetitive work. However, there are some constraints as well. First, if the
load process fails (for whatever reason), there is no rollback. This means
that you now have incomplete setup and that you may have to complete the
load manually.

Secondly, if you can restart the load process, it will most likely continue to
fail. So, you are back to square one.

Please note that Enterprise Structures Configurator (ESC) is designed for new
enterprise setup only. It does not support upgrade or modification to an
existing setup (although we are looking at supporting this for future
releases). That being said, ESC can be used as tool to analyze what a setup
scenario may look like before implementing it as it is possible to create and
review a configuration before it is loaded (and actually updates the
enterprise structure objects).
CASE STUDY – Enterprise Structure Configurator
First Step is Enterprise Information (Name, Legal Information Configuration
Information)
Navigation: Define common Applications configuration for Financials >
Define Enterprise Structure for Financials > Define Initial configuration >
Establish Enterprise Structure
Provide the necessary information and NEXT

Provide Division Information – configurator will guide you

Next Step is to Create Legal Entities – Manage Legal Entities

Create Business Unit – configurator will automatically create

depending on the criteria, or you can manually create as well

Now we have LE and BU (prefix BU) on country (Legal Entity) basis.

System will automatically create Reference data Sets for respective

Business Units
Assign Reference Data Sets to Business Units

Assign Reference data sets to Location reference sets

Now System will show you the Management Reporting Structure

Now you can load the configuration and system will create it in the system. It
can be seen in the report as well

Enterprise Structure – Mandatory/Optional

The enterprise is mandatory because it serves as an umbrella for the entire

implementation. All organizations are created within an enterprise.

• Legal entities are also mandatory. They can be optionally mapped to

balancing segment values or represented by ledgers. Mapping balancing
segment values to legal entities is mandatory if you plan to use the
intercompany functionality.

• At least one ledger is mandatory in an implementation in which you record

your accounting transactions.

• Business units are also mandatory because financial transactions are

processed in business units.

• A shared service center is optional, but if used, must be a business unit.

• Divisions are optional and can be represented with a hierarchy of cost

centers or by a second balancing segment value.
• Departments are mandatory because they track your employees.

• Optionally, add an item master organization and inventory organizations if

you are tracking your inventory transactions in Oracle Fusion Applications.
Enterprise Structures Business Process Model: