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Understanding Multi-Organization Structure in EBS – Part 1

Posted on July 14th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

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In order to allow use of the system by multiple business units, accommodating differing requirements for functional currencies, accounting structures and security, whilst at the same time ensuring a central core design Oracle provides functionality known as "Multiple Organizations" in short is called " multi-Org".This allows different business units to have their own view of the applications, in particular for the financials AP ( Payables), AR ( Receivables), FA (Fixed Assets), CE (Case Management) and INV ( Inventory).

Multi-Org is an important feature of Oracle Applications for several reasons:

  • Allows multiple sets of books and multiple legal entities to be configured and to operate in the same instance
  • Provides support for data security between business units within a single applications installation
  • Permits users to sell and ship products from different legal entities (in different sets of books) with automatic intercompany accounting
  • Supports internal requisitions and purchasing/receiving products from different inventory organizations (within the same set of books)
  • Enables an enterprise to be housed in one database instance of Oracle, spanning multiple countries, currencies, and legal entities without a reduction in response times (architecture-related)
  • Multiple Organizations Reporting enhances the reporting capabilities of Oracle Applications products by allowing you to report at the:Set of Books level, Legal entity level or Operating unit level

multiorg

 

Multiple Organization in Oracle Applications depends primarily on defining your organizational structure in the multi-level hierarchy used by Oracle Applications. The levels are:

  • Business groups
  • Accounting sets of books
  • Legal entities
  • Operating units]
  • Inventory organizations

Business Groups: Oracle Applications secures human resources information, including organization definition, by business group. At least one Business Group will be required for every country since the employee legislation is specific for each country and employee profile is set up at the Business Group level. Security access to the sensitive Human Resources data is secured at the highest level at the Business Group. In short Business Group partitions Human Resources information in a multi-organization structure. Organization Structures and Organization Hierarchy is defined within the Business Group.

Multiple sets of books can share the same business group if they share the same business group attributes, including HR flex-field structures (Grade, positions flex-fields etc).

Accounting sets of books: A General Ledger concept for having separate financial reporting entities for which chart of accounts, calendar, or functional currency differs. In addition for scalability and ensuring independent numbering system for all the accounting transactions as well as the ability to open and close each of the legal entities period independently a separate set of books will be configured for each legal entity.

Legal entities: An organization that represents a legal company for which you prepare fiscal or tax reports. You assign tax identifiers and other relevant legal company information to this entity.

Operating units: An organization that partitions and uses data for Payables, Purchasing, Order Management, Cash Management, Fixed Assets and Receivables. Operating Units allow for configuration of the Oracle Applications across Multiple Business Groups using a single installation of the software.

Inventory organizations: An organization that tracks inventory transactions and balances, and/or that manufactures or distributes products or components. Segregate Item data objects for Inventory, Purchasing, Order Entry, and the Manufacturing Applications (Organization_Id).

Examples could be manufacturing plants, warehouses, distribution centers, and sales offices

The following applications secure information by inventory organization: Oracle Inventory, Bills of Material, Engineering, Work in Process, Master Scheduling/MRP, Capacity, and Purchasing receiving functions. To run any of these applications, you must choose an organization that has been classified as an inventory organization.

HR Organization
Internal Departments to which Employees are Assigned.

Asset Organizations
An asset organization is an organization that allows you to perform asset–related activities for a specific Oracle Assets corporate depreciation book. Oracle Assets uses only organizations designated as asset organizations

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Posted in Beginner, JumpStart | 28 Comments »Email This Post Email This Post | Print This Post Print This Post

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28 Responses
  1. gopal Says:

    Hi Anand,Read ur article..its an informative one.

    I wanted to know whether Inventory transactions such as receiving, internal requistions, min-max and Internal sales order be carried in different operating units Across Set of Books.
    If so can u send me the details of it.
    Its pretty urgent!….

  2. ben Says:

    Hi Anand,

    Can you please tell me at which level does ASSETS come in a Multi org and how do we link ASSETS while doing the Multi org setups.

    Thanks,
    Ben

  3. Sanjit Anand Says:

    ben,

    FA is not multi-org. You can setup different depreciation books that point to different GL SOBs, but that just means the Accounting Flexfield can be a different structure since it belongs to GL.

    Let me know, what additional information you want

  4. Sanjit Anand Says:

    extending the last discussion, here is some more thoughts on FA.

    Fixed Assets Book and Asset Organization
    In Fixed Assets you can setup multiple FA books: corporate books that post to GL, tax books that typically do not
    post to GL, and budget books which are not commonly implemented. FA books are different from GL financial sets
    of books.

    There is some shared setup and some sharing of financial data between FA books. You process transactions by FA
    book and run most processes such as depreciation by FA book. You run most reports by FA book.

    Each AP operating unit interfaces to one FA corporate book. Each FA corporate book then posts to one GL
    financial set of books. You can setup FA corporate books equivalent to operating units, legal entities, or GL
    financial sets of books.

    Maintaining fewer FA corporate books allow you to easily transfer assets anywhere within each FA book. To
    transfer an asset from one FA book to another, you need to retire it from one and add it to another. This can result in
    incorrect depreciation if you use accelerated methods and can impact tax reports, as these transactions are not
    retirements or additions.

    Each FA corporate book can copy transactions to one or more FA tax books. Setup tax books equivalent to tax
    entity (not lower) or GL financial set of books to allow printing complete tax reports from one FA tax book.

    Security , Until 11i, there is no security by book in FA. Each responsibility can access all FA books. In 11i, Oracle added a
    new type of organization, an asset organization. In 11i, you can restrict responsibilities to FA books by specifying an
    organization as an asset organization, assigning FA books to the asset organization, creating an organization
    hierarchy, setting up a security profile with the hierarchy, and assigning the FA: Security Profile to responsibilities. Please do refer to one my old post.

  5. “Business Group” in EBS Says:

    [...] covered in earlier post ,a set of books is a financial reporting entity that shares the three C’s that is Chart of [...]

  6. invoice in one operating unit and payment in other Says:

    will multiorg take care of invoice in one operating unit and payment in other operating unit.

    is there a possibility

  7. Sanjit Anand Says:

    thats true
    it was case in and till Release 11i

    but from Release 12 , all transaction and payment is stamped with LE Context, means new model simply swap the concept.

    Check it
    http://www.oracleappshub.com/accounts-receivable/power-of-autoinvoice/

    and

    http://www.oracleappshub.com/release12/release-12-legal-entity-uptake/

    in case if you still looking, let me know

  8. Olivier Says:

    Hi Anand,

    First of all, thanks a lot for all those information. I am quite a beginner in the subject and this proves to be very useful.

    I have a question on this part : if I consider your schema above, is there a possibility for a supplementary level ?

    I will try to explain further : if I were to implement a big corporate with subsidiaries in several countries. I need to have a subsidiary ledger in a local currency and a GL in dollars for each company (for consolidation in the ‘master company’). Can I have a ‘master company’ aggregating sub companies agregatings various territories and son on ?

    Thanks for you site,

    Olivier

  9. Sanjit Anand Says:

    Olivier,

    Thanks for nice word.

    I would advice you to read multiorg a small document under oracle documentation, which will provide some more thoughts on the way you are looking.

    Yes, The great feature called multi-Org which is designed to support many sets of books for accounting. A Set of Books is the highest level at which the financial reporting entities are segregated.

    Any entity that requires a unique chart of accounts, functional currency, or fiscal calendar should utilize a different Set of Books. (This is a functional distinction,
    not a technical one) Prior to Multi-Org, the Set of Books was set at the site level and this restriction drove companies to have multiple installations of the Applications looking at the same database instance to cover different reporting and transaction needs.

    Cross-Organization feature of Multi-org in a single installation enables a global view of enterprise information. Single installation also allows for more sharing of setup data.

    Oracle Applications supports many cross-organization features that leverage the single installation architecture, including:
    • Automatically generate inter-company invoices with transfer pricing when you sell from one organization and ship from another.
    • Run selected reports at the operating unit, legal entity, or set of books level.
    • Define customers and suppliers in a global registry and secure customer and supplier addresses by operating unit.
    • Purchase products through one legal entity and receive them in another legal entity
    • Support any number of legal entities within a single installation of Oracle Applications
    • Secure access to data so that users can access only the information that is relevant to them.

    Now coming to your query, you can keep, multiple set up of books per entity basis. This is way in which MNC’s are managing there entity , keeping one SOB for local country reporting need and other for consolidation book.

    Normally each entity will have one Primary sob required for local legal need and you can also keep a secondary SOB for Dollar and you can use global Consolidation Process do all consolidation.

    I am not sure, what structure yoy have at your end. If you provide some more inputs for LE, OU and BU then will address some more thoughts on some of key area, which is required to understand

  10. Sanjit Anand Says:

    Lets take a case, you have three entity in three different zones of the globe like

    Therefore u have 3 SOB
    A: US currency USD
    B: UK currency GBP
    C: AUS currency AUD

    All three share same calendar and accounting structure.

    If you are using the consolidation process , which combines the financial results of different companies, typically combining subsidiary accounting information into a parent company for reporting purposes.

    you can use Consolidation Tools like FSG or GCS
    Through Financial Statement Generator (FSG)
    #you can use Financial Statement Generator (FSG) to consolidate financial information for businesses using a single set of books or businesses using different sets of books that share the same calendar and chart of accounts.
    #Use recurring journals, mass allocation journals, and standard journals to create intercompany elimination journal entries for multiple companies sharing the same set of books.

    where as from Global Consolidation System (GCS)
    #you can use Global Consolidation System (GCS) to consolidate financial information for multiple sets of books, diverse financial systems, and geographic locations, including both Oracle and non-Oracle applications.
    #Use the Consolidation Workbench in GCS to:
    #you can access windows used to perform each consolidation activity.
    #you can monitor the status of your consolidation.
    #also view history of past consolidations.

    Consolidating Multiple Companies with Multiple Sets of Books
    #when companies do not share the same currency, calendar, or chart of accounts reside in separate sets of books, and, possibly, separate instances, or non-Oracle applications. With the Global Consolidation System, you can:
    #Consolidate the results of multiple organizations, with different sets of books that use different currencies, calendars, and charts of accounts.
    #Initiate consolidations from your parent set of books or subsidiary set of books.
    #Consolidate actual amounts as well as budget amounts.
    #Consolidate account balances or transactions.
    #Create automatic intercompany eliminations.
    #Consolidate the results of multiple organizations on multiple database instances.

    Hope this will help you in understnading.

  11. Yuvaraj Says:

    Please clarify the possibilities of having multiple legal entities (various countries) under a single business group in Oracle 11i

  12. Sreekanth Allamudi Says:

    I Have

    1. Business Group
    2. Three Set of books
    US, UK & Mexico
    3. Under US SOB, I’ve three legal entities (balancing segment is my legal entity)
    4. I’ve operating units for each legal entity.

    Question: One of the legal enitity is aquired by an other new Legal entitiy. We would like to move the data (open AP, open AR) into new legal Entity under the same set of books (US). What is the best practice and how do I go about in doing it. We’re in 11.5.10.2
    Please advice.

  13. 11i Setup for nd LE Says:

    [...] Understanding Multi-Organization Structure in EBS – Part 1 [...]

  14. Sanjit Anand Says:

    check it at, i tried to put into post.
    http://www.oracleappshub.com/general-ledger/leou-question-on-merger-or-de-merger/

  15. LE/OU Question on Merger or De-Merger Says:

    [...] A reader query from Sreekanth Allamudi [...]

  16. Sowmya Says:

    Is there a way I can do a following security setup in FA. I have one business group (eg. ABC), one set of books (GL)(eg. ABC_SB) and multiple operating units (e.g. X, Y, Z). I want to setup security such that operating unit X should not see Y and Z data etc., is there a way I can do it? I setup an Org Hierarchy and am trying to setup FA security profile for each of the operating units. Is this the correct approach ?

  17. Shree Says:

    Hi Anand,

    I’m a regular visitor to your blog and i really like the way you present your topic.

    I have a quation. Currently we have oracle applications 11i (11.5.10.2) financials and projects. Currently,In US we have one set of books with multiple operating units.Out of which we want to split one existing ou into multiple OUs for better analysis and reporting. Currently we have 2 major line of business that we operate. We have this line of business also part of our chart of accounts. I need to know the best practices/advantages/disadvantes/limitatons of having different OUs for each line of business compared with running reports fron single OU by line of business segment from the COA.

    Thanks for your help,
    shree.

  18. BENALI Says:

    Hi Anand,
    Thank you for this helpful site.
    I have a question:
    Can we have different operating units, each of them related to a different chart of account and having juste one inventory master organization so we can use juste one Item referential?
    Thank you Anand

  19. Maryam Says:

    Hi

    Can you kindly tell me if it is possible to have access to different OUs from different LEs in same responsibility?

    Thanks a lot

  20. Maryam Says:

    Hi again

    My question is for R12.

    BR

  21. Shailesh Kokare Says:

    Hi Anand,

    This is very informative.

    Can i get summary document where i can decide organization structure before implementing oracle EBS i.e. How to decide org. structure and fit in structure as explained by you

  22. Geethika Says:

    Useful information, thanks.

  23. sri Says:

    can u tell me, how can i transfer standard costing a/c to another business unit oroperating unit ?

  24. Rajeshvarma Says:

    Hello Anand

    I want to know something…Actually we all define multi org structure. Normally we will link operating units to inv org ,,,SOB to Operating units,,,,But what my question is how we link business group and legal entity . Could you please give me answer plzz

  25. Ram Says:

    HI Anand,
    Suppose if i have to redploy a LE what are the effort required in terms of setup in oracle 11i. can you please provide me the info. that will be great help

    Regards
    Ram

  26. Asad Ullah Says:

    Hi Annad

    Thanks for your comprehensive information and repplies to the various queries.

  27. Anuradha Says:

    Very informative. !!

  28. ram Says:

    Thanks for your information about multi org

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