Single SOB multiple OU for Multiple Legal entities

[mdkamran]

Hi Everybody,

I have situation here, where the client is in Real Estate business. For each project that is started a new company (legal entity) is incorporated. This is because a project involves outside investments and hence to protect the Holding company's shareholding pattern and prevent dilution of ownership a new company is formed for every new project.

The accounts office is centralized. For each new project/Company a new bank account is opened. The current scenario is that a customer may issue a single cheque for a unit purchased in Project 1 and another in Project 2.

This would be avoided in the future and bank accounts would not be interchangeably used.

Hence can I go ahead now, and have a single SOB and a single Operating unit. And then do consolidation through FSG for all the companies.

or
Have a single SOB and multiple Operating units for each company. One advantage is this would provide data security (which actually is not required at the moment, becasue the accounts are handled by the same set of people for all the companies). But the advantage is we can close periods at the sub ledger level for each operating unit independantly at different intervals.

or

have multiple Set of Books.

What ever is the approach we have to do present a consolidated Balance Sheet for all the companies put together.

Please advise me, which would be best route.

regards,
Mirza.

[SIVAKUMAR_G]

Hi

It is better to go with Single SOB with Multiple Operating Units (Each Operating Unit is one Balancing Segment in GL). This way it will help them to check profitability earned in each Project and they can get a consolidated P&L and BS using FSG

As you mentioned it helps in data security also.

Hope this helps

Regards
Sivakumar

[C-MOON]

Mirza this is perfect example of muti org environment where we can use single SOB for each separate OU that has its own nature of business.
u can create one LE and attach all OUs with it using one SOB and BG will also obviously be one but in second scenario where u can opt for change in period in Oracle we say Calendar , with the change in calendar SOB will get change for that particular line of business (OU) then with changed SOB new LE will be required to be set up to attach this SOB and ur BG will be same in this case u can also get consolidated reports.

[mdkamran]

Hi Siva,

Thanks a lot. You suggesstion is to have a Single SOB and Multiple OU's.
Single SOB is fine. I have my doubts and clarifications about having multiple OU's.

1- By having all companies in a single Operating Unit, we can still check profitability earned in each project. We have the project as a whole represented by the Company at the balancing segment level. (Pls correct me if I am wrong)

2- We can do FSG consolidation also, with multiple companies in a single Operating unit. (Again pls correct if I am wrong)

3- The obvious disadvantage is that we will not have data security.

Now my doubts....if we have multiple operating units, how do we address these issues?

1- customers who are dealing two different companies would issue a single cheque, which can be deposited in any one of the bank accouns

2-Sometimes there is a requiremnt to transfer funds from a bank account opened up for one company to a bank account opened for another company.

3- Amoung the 18 companies that are there (ie. 18 projects that the company is running), thought there are 18 different bank accounts for each company, the facility of receiving CREDIT CARD PAYMENTS is there only with respect to one bank account. Hence when a customrer makes a payment by credit card, then irrespective of which ever company he is paying for, it can be deposited in only one bank account. And then an intercompany adjustment will have to be done.

4- sometimes Payments to suppliers are done on a consolidated basis, ie one payment for an invoice which relates to multiple projects(ie. companies). In the sense this supplier is catering to supplies for various projects. And it is economical to make a single payment.

In the light of the above requirements, would it be prudent to still go for multiple OU's.

regards,





[quote]Hi

It is better to go with Single SOB with Multiple Operating Units (Each Operating Unit is one Balancing Segment in GL). This way it will help them to check profitability earned in each Project and they can get a consolidated P&L and BS using FSG

As you mentioned it helps in data security also.

Hope this helps

Regards
Sivakumar

<i><div align="right">Originally posted by SIVAKUMAR_G

[C-MOON]

Mirza
u have certain confusions in mind regarding the relationship of OUs with LE and Fsg as well i would recommend u to study for ur more knowledge an online Financial apps book written by Sikandar HAYAT KHAN and also available here on this forum it will clear ur concepts more otherwise u will be dragged by ur mind from this place to other.
mohsin
lahore
Pakistan

[mdkamran]

Thank you, Mohsin. Can U tell me where exactly I can find this book online.

(I was only trying to say that though there different companies for each project that this organization is running, there are transactions at the subledger level that they are doing interchangeably between companies. For example, receiving a single cheque from 2 different customers of different companies, which can be deposited in only one bank account.)

Anyway thanks and do let me know about where I can find this online book by Sikandar Hayat khan.

Mirza






[quote]Mirza
u have certain confusions in mind regarding the relationship of OUs with LE and Fsg as well i would recommend u to study for ur more knowledge an online Financial apps book written by Sikandar HAYAT KHAN and also available here on this forum it will clear ur concepts more otherwise u will be dragged by ur mind from this place to other.
mohsin
lahore
Pakistan

<i><div align="right">Originally posted by mohsinsa

[dhaimes]

Your decision would depend firstly on where these companies are being set up and what features/modules you plan to use.

The post below discusses the general topic and advice

http://davidhaimes.wordpress.com/2007/1 ... -entities/

You can have 1 OU per LE, but all LE in a singled set of books.

What release are you on? R12 would help a lot with this as you can assign the LE owner to a bank account and the Intercompany can be dealt with better if on LE pays on behalf of another. Plus the ledger access sets might help secure data too.

[mdkamran]

Thanks Haimes. This implementation involves just the Financial modules to begin with. Later on the Project module would be implemented.

I am release 11.5.10.2. The fact that I have to go by one SOB is clear to me. What I was debating on was whether to have a single OU or multiple OU's. The client does not insist on Data Security. And all the work force is centralized with the same set of people handling accounts for all the projects. In a strict sense it is the same comapany that is running various projects and incorporating a new company for every new project that it undertakes.

Problably the only thing that I have take into account is that all standard reports are at the OU level.

regards,




[quote]Your decision would depend firstly on where these companies are being set up and what features/modules you plan to use.

The post below discusses the general topic and advice

http://davidhaimes.wordpress.com/2007/1 ... -entities/

You can have 1 OU per LE, but all LE in a singled set of books.

What release are you on? R12 would help a lot with this as you can assign the LE owner to a bank account and the Intercompany can be dealt with better if on LE pays on behalf of another. Plus the ledger access sets might help secure data too.

<i><div align="right">Originally posted by dhaimes

[dhaimes]

You say - " In a strict sense it is the same company"

No, not at all in the strict sense, that being the legal aspects, they are different companies - you might want to talk to the finance staff, your controller or corporate accountant about the Intercompany aspects. There are serious legal implications about getting Intercompany wrong - you could read up about Enron for examples of this.

If these companies are all US based, then one sob is the right option, if any of them are non US, it is reccomended to have one sob and 1 OU for each company.

When you implement projects, you will find what projects calls intercompany (for it's I/C billing features) is interOU - it assumes 1 OU per Legal Entity and cannot handle many LE in a single OU well. That might be a consideration for you.

[mdkamran]

Thanks David, for ur inputs. All these companies are outside US. Neverthless the I have multiple SOB's the problem is it would not possible to report on all projects in a single FSG report. Morever with a single SOB online inquiry would be useful. These companies that are incorporated is only for a specific project and would be closed once the project is completed and sold off. So dont u think that it would make more sense to have a single SOB.

The difficult decision is the Operating unit issue. I have one question. What is the implications of having numerous inter company transactions in a multi operating unit scenario.

regards,
Mirza.




[quote]You say - " In a strict sense it is the same company"

No, not at all in the strict sense, that being the legal aspects, they are different companies - you might want to talk to the finance staff, your controller or corporate accountant about the Intercompany aspects. There are serious legal implications about getting Intercompany wrong - you could read up about Enron for examples of this.

If these companies are all US based, then one sob is the right option, if any of them are non US, it is reccomended to have one sob and 1 OU for each company.

When you implement projects, you will find what projects calls intercompany (for it's I/C billing features) is interOU - it assumes 1 OU per Legal Entity and cannot handle many LE in a single OU well. That might be a consideration for you.

<i><div align="right">Originally posted by dhaimes