Fusion Apps - Fusion Enterprise Structures

Fusion Apps - Fusion Enterprise Structures
FA Implementation Solutions Team Sarah Bowen, June 2012 1

Agenda Overview Designing your Enterprise Structures Reference Data Sharing Case Appendix: Set-up tasks

Enterprise structures
Overview Enterprise structures - form the foundation of security, processing & setups reflect the legal, managerial & functional structure of the enterprise Business Value: Naturally reflect real-world legal and management entities Meet management objectives and comply with legal constraints Provide foundation for advanced shared services

Every enterprise has three fundamental organization structures:- Legal
Overview Every enterprise has three fundamental organization structures:- Legal Managerial Functional Every Enterprise has three fundamental structures that are used to describe its operations and provide a basis for reporting. In Oracle Fusion, these structures are implemented using the chart of accounts and organizations. Although many alternative hierarchies can be implemented and used for reporting, you are likely to have one primary organization structure that organizes your business into divisions, business units, and departments aligned by your strategic objectives. 4

Legal Structure A legally recognized entity can
own and trade assets employ people in the jurisdiction in which it is registered When granted these privileges, legal entities also: Account for themselves to the public through statutory and external reporting Comply with legislation and regulations Pay income and transaction taxes Process value added tax (VAT) collection on behalf of the taxing authority Corporations, sole proprietorships, partnerships and government agencies are all types of Legal Entities. Many large enterprises isolate risk and optimize taxes by incorporating subsidiaries. They create legal entities to facilitate legal compliance, segregate operations, optimize taxes, complete contractual relationships, and isolate risk. Enterprises use legal entities to establish their enterprise's identity under the laws of each country in which their enterprise operates. 5

Management Structure Successfully managing multiple businesses within one Enterprise requires that you segregate them by strategic objectives AND measure their results Although related to your legal structure, the management structure does not need to be reflected directly in the legal structure of the enterprise Can include divisions, subdivisions, lines of business, strategic business units, departments, and cost centers. In my example, I am sitting in the Development Line of Business but report up into a US based manager who is not part of the UK Legal Entity. I am, however, part of a cost center that rolls up into a Development management reporting structure. 6

Structured around people and their competencies.
Functional Structure Structured around people and their competencies. For example, sales, manufacturing, and service teams are functional organizations. Organizations must manage and report revenues, cost of sales, and functional expenses such as research and development (R&D) and selling, general, and administrative (SG&A) expenses. Implemented using departments and organizations, including sales, marketing, project, cost, and inventory organizations. 7

Points to Consider What components of your Enterprise do you need to report on separately? Which components can be represented by building a hierarchy on top of other components to give visibility at the detail and a summary level? What reporting and process control do you need to support the managers of your business units? What business functions are performed by a corporate department or shared service center? What level of security and access is allowed across business units? How do you comply with your corporate external reporting requirements and local statutory reporting requirements?

Enterprise The highest level of the organization Typically only one enterprise per production environment

Ledgers Record-keeping structures that record your transactions and track your financial results Typically minimum of one ledger per country due to ‘4 C’s’ Calendar Currency Chart of Accounts (COA) aCounting Method though in some countries, it may be one ledger per legal entity depending on security, processing and document sequencing requirements etc. Three Balancing Segments in the COA Primary, often used to identify the Legal Entity Secondary, you might use as for a major business axis Third, you might use for another business axis They balance entries though intracompany accounts Trees so that you can roll up COA segment values intelligently Essbase Cubes in Ledger provide dimension tracking Typically, separate ledgers for each country because each subsidiary accounts in the local currency. In some countries, strict journal and document sequencing requirements mean that there must be no more than one primary ledger per legal entity. For example, in Spain, Oracle recommends that there is one ledger (and hence, one business unit per business function) per legal entity. Ledgers with the same calendar, chart of accounts (and currency) can be grouped into ledger sets for reporting and processing. For example, users can run revaluation, translation, open / close periods and submit standard reports for a ledger set. Accounting for transactions in business units flow into ledgers. Many business units can “feed” a single ledger however, as mentioned earlier, Oracle may recommend that for operations in countries with strict sequencing requirements , there is no more than one ledger per legal entity. Ledger sets Even when ledgers are at the legal entity level, Ledger sets (not shown on the slide), ledgers with the same calendar, chart of accounts can be grouped into ledger sets for reporting and processing. Users can run revaluation, translation, open /close periods and submit standard reports for a ledger set. Posting in GL automatically updates the multi-dimensional financial reporting cubes for real time financial reporting. Generally, speaking there will be one cube per COA and calendar although to obtain full reporting, in the reporting currency. Financial reporting features include Report Studio for highly formatted reports, Excel integration and an allocation engine. Currency conversion When appropriate, translation into corporate currency occurs Currency – for both business and regulatory reasons, foreign subsidiaries usually generate their primary accounting representations in local currency. For example, the primary representation for Spain uses Euros. The COA, accounting methods and calendar are all independent of the accounting currency i.e. you can use the corporate accounting method, COA and calendar when accounting in Euros, UK sterling or US Dollars. The automated revaluation of the local currency to the corporate reporting currency is a feature offered in EBS R12 and Fusion. For example, the conversion of the Spanish operations in EUR to US When appropriate, multiple representations The Fusion ledger architecture also provides a number of options for simultaneously meeting local and corporate accounting requirements. Although there is convergence on IFRS for consolidated accounts, there remain detailed local reporting requirements for legal entity reporting, especially in Southern Europe. Same COA / ledger A common solution is to create a “local reporting” segment in the corporate chart of accounts and / or use consolidation to create a secondary accounting representation with a different chart of accounts however; sometimes, this is not the ideal solution because: In some cases, local reporting requirements are materially different from US GAAP. It’s not just a question of different accounts but different journal lines altogether (for example, the non permanent inventory standard in Italy, correspondence accounting is Eastern Europe, Federal accounting in the US etc.) In some cases, there are journal entry sequencing, minimum disclosure and summarization requirements that are country specific Most importantly, the corporate standard chart of accounts and accounting method becomes a compromise between corporate and all local subsidiaries that want to do it “their way” Separate COAs and ledgers Balance Copy – apply GL COA mapping to balances. No detail of original journals is propagated. The following two rely on Subledger Accounting.. Adjustment Ledgers – adjustment ledgers contain only the deltas between the corporate and local accounting representations. A ledger set that contains the corporate + delta = local (or vice versa). Need to have the same COA, not have any complex sequencing rules etc. Full multiple representations: ou can see that I have added an additional accounting representation for the Spanish operations. It has an Spanish local COA and accounting method. The Spanish operations generate two completely independent sets of accounting, one which follows the corporate accounting policies, the other Spanish local reporting regulation. However, even if it did, Oracle best practice is for the balancing segments value sets to be the same for all ledgers. If the balancing segment value sets differ, it won’t be possible to use many Fusion features such as advanced intercompany) So, replacing the Corporate COA with the Local COA – which has its own segment values for account, cost center etc., the balancing segments; and the intercompany segment are always the same. In short, Oracle best practice is for the balancing segment value sets to be the same for all COAs General Ledger

Account Hierarchies in the CoA
Create account hierarchies (trees) to identify managerial, legal or geographical relationships between your value set values Define date-effective tree versions to reflect organizational changes within each hierarchy over time Publish multiple hierarchies to balances cubes to allow for financial reporting and analysis of past, present or future data Value set Management hierarchy 2010 version 2011 version Geographical hierarchy Chart of accounts segment Assign a specific hierarchy to your segment to be used for general ledger processing (e.g. revaluations, balance transfer) Since a segment is associated with a value set, all published hierarchies may be used to perform date-effective comparisons of financial data 1 2

A legal entity can optionally be designated as
A legal entity is a recognized party with rights and responsibilities given by legislation Define a legal entity for each registered company or other entity recognized in law for which you want to record assets, liabilities, and income pay transaction taxes perform intercompany trading A legal entity can optionally be designated as Legal employer – refers to a legal entity that employs workers Payroll statutory unit – refers to a legal entity registered to pay and report on payroll tax and social insurance on behalf of one or many legal entities, depending on the structure of your enterprise Financial transactions are (invoices, payments etc.) are owned by a single legal entity Define Common Applications Configuration for Financials Define Enterprise Structures for Financials Define Legal Jurisdictions and Authorities for Financials Manage Legal Jurisdictions Manage Legal Authorities Manage Legal Addresses Define Legal Entities for Financials Manage Legal Entities Manage Legal Entity Registrations Define Legal Reporting Units for Financials Manage Legal Reporting Units Manage Legal Reporting Unit Registrations Ledgers are linked to Legal Entities in FSM under the following navigation:- Define Accounting Configurations Manage Primary Ledgers Assign Legal Entities

Legal Entity Each of your legal entities has one or more legal reporting units to support specific local reporting requirements When a legal entity is created, a main legal reporting unit with the same name gets automatically created Legal entities are explicitly defined and subledger transactions such as supplier and customer invoices; payments etc. are owned by a legal entity. A ledger may store the accounting for one or more legal entities. 14

Business Units Process & generate business transactions on behalf of one or more legal entities Performs one or more explicit business functions that can be rolled up in a management hierarchy. Business functions represent business processes or activities that explicitly describe how a business unit is used Examples include billing and revenue management, customer payments, payables invoicing, procurement, requisitioning, etc. Business Units can potentially roll up into divisions if you structure your COA with this type of hierarchy. More than one business unit can be accounted in a single ledger. 15

Use business units in the following ways
Partition transactions – business transactions generated in a particular business unit is stored separately from transactions processed in other business units Secure transactions – assign data roles associated with your business units to your users to secure access to your business transactions Share reference data – reference data objects can be shared across multiple business units, thus significantly reducing setup efforts How do I secure my transactional data using business units? Business units are used by a number of applications to implement data security. When a business unit is created or when a business function is enabled for a business unit, the application can trigger the creation of data roles for this business unit based on the business function's related job roles. Therefore, based on the correspondence between the business unit and the job roles, appropriate data roles are generated automatically. You assign data roles to your users to give them access to data in business units and permit them to perform specific functions on this data. 16

Business Functions in Fusion v1
Product Family / Pillar Business Functions CRM Order Capture Customer Contract Management Procurement Contract Management Sales Marketing Service Request Management HCM Incentive Compensation Procurement Requisitioning Product Family / Pillar Business Functions Financials Payables Invoicing Payables Payments Billing and Revenue Management Customer Payments Expense Management Collections Management Projects Project Accounting SCM Order Fulfillment Orchestration Materials Management Receiving

Business Units & Business Functions
If you enable a Financials related business function, then you will need to specify which Ledger and Default Legal Entity the Business Unit should point to. If you enable the Marketing Business Function, then a Default Currency must be selected.

Shared Service Centers (SSC)
You can define relationships between business units to outline which business units provide service to the other business units. Oracle Fusion applications supports SSCs in two ways. Business unit security, which allows your shared service centers personnel to process transactions for other business units called clients. the service provider model expands on this capability to allow a business unit and its personnel in a shared service center to work on transactions of the client business units.

Human Capital Management
The Legal Employer is a Legal Entity. For Payroll purposes, HCM requires Legislative Data Groups, which are typically at the country level. A worker is assigned to a department. Departments in HCM can cross legal and country boundaries. For example, there could be a single procurement department with workers in both the US and the UK (although they are employed by different legal entities, in different countries etc).

Reference Data Sharing (Set ID)
Introduction… Ability to share reference data between ledgers, business units or other enterprise structures. Business units can have their own reference data or “subscribe” to a (reference data) set Fusion Business Value… Single source of truth for reference data Some autonomous aspects of corporate policy should affect all business units, other aspects can be left to the discretion of the local manager Faster / easier definition and maintenance. Duplication and hence, discrepancies between setups/reference data, eliminated You can override the default set individually for each reference data object. For example, assign separate sets for payment terms, transaction types, and sales methods to your business units For example, if your enterprise holds business unit managers accountable for their profit and loss, but manages working capital requirements at a corporate level, you can let managers define their own sales methods, but define payment terms centrally. In this case, each business unit would have its own reference data set for sales methods, and there would be one central reference data set for payment terms assigned to all business units. Note that a ‘common set’ data set is predefined in the system.

Reference Data Sets in Fusion v1
Application Reference Data Object Trading Community Model Customer Account Relationship Customer Account Site Sales Person Opportunity Management Sales Method Group Work Management Assessment Templates Enterprise Contracts Contract Types Sales Sales Method Common Components Activity Templates Payables Payment Terms Receivables Accounting Rules Aging Buckets Auto Cash Rules Collectors Lockbox Memo Lines Remit To Address Revenue Contingencies Application Reference Data Object Receivables Transaction Source Transaction Type Advanced Collections Collections Setups Dunning Plans eTax Tax Classification Codes Performance Management Performance Templates Goal Management Goal Plan Templates Human Resources Departments Jobs Locations Salary Planning Works Councils Project Billing Project and Contract Billing Project Foundation Project Accounting Definition Project Rates Distributed Order Orchestration Hold Codes Orchestration Process

Maintaining Reference Data Sets
Maintain your reference data sets. Note that the “Common Set” data set is predefined in the system. Create your business unit and assign it a default set. This automatically generates mappings between all reference data objects and the business unit, via the default set. Tailor your default business unit set assignments by associating specific reference data objects with different data sets Example Reference data set Common Set (predefined) Enterprise Set USA Set Reference data object Set assignment Payment Terms Common Set Transaction Types Memo Lines Example Business unit InFusion USA Sales Default set Common Set Example Reference data object Set assignment Payment Terms Enterprise Set Transaction Types USA Set Memo Lines Common Set 24

InFusion Enterprise Example
InFusion Corporation is a multinational conglomerate that operates in the United States (US) and the United Kingdom (UK). Its product line includes components to build and maintain air quality monitoring (AQM) systems for homes and businesses. It has two distribution centers and three warehouses that share a common item master in the US and UK. Its financial services organization provides funding to its customers for the start up costs of these systems.

InFusion Enterprise Example
InFusion is required to report using US GAAP standards and UK Statements of Standard Accounting Practice and Financial Reporting Standards Managers need to show profit and loss (actuals and projected) for each line of business The enterprise has all administrative, accounts payable, procurement and human resources functions performed at the corporate headquarters.

InFusion Corp:

InFusion Example – Summary
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. • Optionally, add an item master organization and inventory organizations if you are tracking your inventory transactions in Oracle Fusion Applications. Note Some Oracle Fusion Human Capital Management (HCM) and Customer Relationship Management (CRM) implementations do not require recording of accounting transactions and therefore, do not require implementation of a ledger. 29

Reference Data Sharing
Systems Reference Data Set used by US Systems and UK Systems BUs Financial Services Reference Data Set used by Fin Services BU Enterprise Reference Data Set used by Corporate BU

Many Related Functional TOIs can be found on OPN*
Additional Resources Enterprise Structures Concepts Guide 11g Release 1 (11.1.4) Part Number E Many Related Functional TOIs can be found on OPN* Define Initial Configuration Setup the Chart of Accounts Define Project Orgs Define Resource (Sales) Orgs HCM Enterprise and Workforce Structure Implementer Training Setting Up a Minimal Enterprise Structure to Support Procurement Shared Services MOS Note: * Oracle Partner Network

Fusion Applications Implementation Solutions (FAIS) Team
Contact Information Nigel King – Elie Wazen – Kiran Mundy – Sarah Bowen –

Questions and Answers 33 33

Overview of Setup Tasks Define Enterprise Structures using FSM
Each offering has a Define Enterprise Structure Tasklist. You only have to perform the Enterprise Structure setup once for all offerings.

Enterprise Structures Task List
You can use the Configuration Wizard/Configurator to define your initial configuration You can also define and/or maintain each element separately Benefits of using the Wizard A simplified interview style setup process that guides customers through the definition of the high-level organizational structures of their enterprise Used for initial implementation of any Fusion Application Enterprise, Divisions, Legal Entities (Legal Employers and Payroll Statutory Units), Business Units, Reference Data Sets, Legislative Data Groups, as well as any Locations associated with the Orgs created Job and optionally Position flex field structures Embedded templates and best practice business rules Users can change any generated structure to complete their setup Implements FSM export/import functionality to copy Enterprise Configuration data across Fusion instances 36

Enterprise Structures Configuration
Start here to use the wizard 37

Define Initial Configuration using the wizard
To set up a simple Enterprise Structure with one legal entity and one business unit, click the “No, I have only one legal entity” selection and that is all that is required. It will create one legal entity, one business unit, one reference data set and that’s it. 38

Manage Divisions 39

Manage Legal Entities 40

Create Business Units 41

Manage Business Units 42

Manage Business Units The mapping between a business unit and legal entities is also inferred from the primary ledger assigned to the business unit and its associated legal entities 43

Manage Reference Data Sets
44

Configuration Review 45

Review and Load Configuration
For a non-HCM implementation, job and position structures are not needed Final step is to review and load your configuration. Once a configuration is loaded you can make changes via the individual screens

Maintain Enterprise Structures
Now let’s do it manually without the wizard We’ll define the Enterprise and then define a Business Unit

Maintain Enterprise Information

Maintain Business Units

Manage Set Assignments

Define Business Units Business Units also allow you to define which business functions they perform and define any service provider relationships which may apply The configuration options for each business function can also be defined for each business unit

Define Business Unit Business Functions
You assign your business units one primary ledger and a default legal entity This assignment is mandatory for business units with business functions that produce financial transactions In some cases the legal entity is explicit in your transactions; however if the legal entity context needs to be derived from your business unit, then the default legal entity is used if the derivation rules cannot find a better match

Define Business Unit Service Provider

Now let’s define the item organization

Define Item Organizations

Geographies and legal locations will be setup before you define the enterprise (since you need a location for the Enterprise)

Fusion Apps - Fusion Enterprise Structures

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