Legal Entity:
Legal Entity represents a legal company for which Fiscal and Tax reports are prepared. A Legal Entity can Model to an Enterprise, a Designated Legal unit which is recognized by legal authorities in a country. Legal entity is a business entity that is known to exist to the outside world. Internal organizations or divisions are not legal entities themselves, but are just part of it. In the Multi Organization structure various legal entities could share the same ledger. Both legal entities and operating units are associated with the ledger and the relationship between the legal entity and operating unit is derived based on the ledger.
A legal Entity can be associated to Single Ledger, Multiple Legal Entities can be Associated to a Ledger.
A Legal Entity can be defined using two different Navigations.
- Legal Entity pages of Accounting Setup Manager
- Legal Entity pages in Legal Entity Configurator
The only difference between the above two is that Balancing Segment Value can be assigned to legal entities using Accounting Setup Manager.
How Legal Entity Is Mapped to Different Functionalities in Oracle Application R12:
- Accounting Structures --> Legal Entity is mapped to Balancing Segment Values and Ledgers
- E Business Tax --> Legal entity is used to identify the Jurisdiction and the parties and where they are registered or located to determine the Tax applicability
- Bank Accounts --> In Oracle Applications R12 Legal Entity is the Owner of the particular bank account be it a Internal or Remittance bank account. And can be used by The Operating Unit which shares the same ledger as that of the Owning Legal entity.
- Payables and Receivables --> the Legal Entity is stamped on the transactions and used to identify the Legal Owner for Legal reporting as well as Tax calculation. The transactions exists within an OU and that OU has a ledger which will account the transactions, if a transaction has more than one LE associated with it then a hierarchy of LE derivation is used to default an LE. Ideally The Legal entity is the owner of that transaction.
- Intercompany Accounts and Intercompany Processing Rules --> Intercompany journals involve balancing segment values that map to different legal entities. These journals are balanced for each legal entity by using their intercompany accounts.
