Oracle Fusion Cloud Applications
Understanding Enterprise Structures
Chapter 1
Enterprise Structures
A legally recognized entity can own and trade assets and employ people in the jurisdiction in which the entity is
registered. When granted these privileges, legal entities are also assigned responsibilities to:
• 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.
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 within the laws of each country in which their
enterprise operates.
The figure illustrates:
• A separate card represents a series of registered companies.
• Each company, including the public holding company, InFusion America, must be registered in the countries
where they do business.
• Each company contributes to various divisions created for purposes of management reporting. These are
shown as vertical columns on each card.
For example, a group might have a separate company for each business in the United States (US), but have its United
Kingdom (UK) legal entity represent all businesses in that country.
The divisions are linked across the cards so that a business can appear on some or all of the cards. For example, the
air quality monitoring systems business might be operated by the US, UK, and France companies. The list of business
divisions is on the Business Axis.
Each company's card is also horizontally striped by functional groups, such as the sales team and the finance team.
This functional list is called the Functional Axis. The overall image suggests that information might, at a minimum, be
tracked by company, business, division, and function in a group environment. In Oracle Fusion Applications, the legal
structure is implemented using legal entities.
Management Structure
Successfully managing multiple businesses requires that you segregate them by their strategic objectives, and measure
their results. Although related to your legal structure, the business organizational hierarchies don't have to be reflected
directly in the legal structure of the enterprise. The management structure can include divisions, subdivisions, lines
of business, strategic business units, profit, and cost centers. In the figure, the management structure is shown on the
Business Axis. In Oracle Fusion Applications, the management structure is implemented using divisions and business
units as well as being reflected in the chart of accounts.
Functional Structure
Straddling the legal and business organizations is a functional organization structured around people and their
competencies. For example, sales, manufacturing, and service teams are functional organizations. This functional
structure is represented by the Functional Axis in the figure. You reflect the efforts and expenses of your functional
organizations directly on the income statement. Organizations must manage and report revenues, cost of sales, and
functional expenses such as research and development and selling, general, and administrative expenses. In Oracle
Fusion Applications, the functional structure is implemented using departments and organizations, including sales,
marketing, project, cost, and inventory organizations.
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