In the Oracle Fusion Clouds, a Business Unit (BU) is a system organization that:
1. Performs business functions – assign business functions to business units and associated business units with a ledger in order to process and partition your business transactions.
2. Partitions transactions – business transactions generated in a particular business unit is stored separately from transactions processed in other business units.
3. Secures transactions – assign data roles associated with your business units to your users to secure access to your business transactions.
4. Shares reference data – reference data objects can be shared across multiple business units, thus significantly reducing setup efforts.
You can use BUs to store data on behalf of a Legal Entity. As compliance with transaction tax auditing legislation is built into transaction types and transaction types are stored by a BU, this is an effective way to manage transaction compliance. The real world legal entity's compliance obligations are administered by:
• BU on subledger transactions and
• Ledger for balancing, closing, and reporting rules. Depending on the nature of the regulation with which you must comply, various combinations of real-world company and system legal entity, BU, and Ledger are possible. In a worldwide deployment, one would expect to see all combinations in place in different situations.
• One legal entity accounts for itself in one Ledger storing subledger data in one BU. This is a normal setup for a country or region that closely regulates subledger data by legal entity.
• Several legal entities account for themselves in one Ledger storing subledger data in one BU, and use the Chart of Accounts primary balancing segment to produce financial statements for each legal entity.
This is a normal setup for a country or region that regulates a group of companies as a whole.
• A legal entity or group of legal entities account for themselves in one Ledger storing subledger data in several BUs. This is a normal setup for a group doing business in highly regulated industries in a given country or region.
• A part of a legal entity accounts for itself in a ledger using one or several BUs. This is a normal situation for a large corporation using several instances or Enterprise Resource Planning (ERP) systems.
System legal entities, Ledgers, and BUs are defined in relation to one another. A legal entity accounts for itself in the Primary Ledger and optionally in other ledgers, and stores its subledger data in one or more BUs.
BUs are often identified with security. In Oracle Fusion Applications, users are given access to the data they handle through "data roles". A data role is associated with a specific BU. A user can be granted access to several BUs through the assignment of multiple data roles. By securing subledger data in this way users can access and process transaction information only for the particular business unit or set of business units to which they have been granted access. They view only what they need and have the authorization to view.
This is very fundamental security. Oracle Fusion Applications incorporate many other security models specific to circumstances that match the usage and deployment requirement needs that you have for those circumstances to provide comprehensive and appropriate security.
BUs can be used to model autonomous organizational units that create financial transactions. You create, process, and report on subledger financial data within the context of a BU.
• Use a BU when you need to keep the data of one organization distinct - at arm’s length - from the data of another organization. You might have the right to prevent a state's transaction tax auditor from viewing the transactions of a neighboring state; consider storing each state's transactions in separate BUs. This right often exists when the states are independent nations, but seldom when they are federated.
• Use a BU when you need to comply with transaction tax law that is substantially different (more than just the tax rates) to similar laws in the neighboring state. You can use product "transaction types" to create similar transactions that follow different documentation and processing practices.
• Use a BU when you wish to keep data of an operation private from the management of another operation. For example, within a financial institution division, you may want to keep the transactions and data of the lending operation separate from that of the brokerage operations.
BUs divide the subledger document data in Oracle Fusion Financials into distinct segments. Standard reports and processes run within BUs, and 'special' reports and processes run across them. You can deploy BUs to provide barriers that require special access, reporting, and processing to cross.
Subledger Accounting and Business Units
While subledger transaction rules are governed by BU, subledger accounting rules are not BU dependent.
BUs store transaction types and rules that govern the transaction document such as invoices, and the business rules (for example, credit terms) that you want to be applied to those documents.
Subledger accounting rules are not stored by BU. They are stored centrally but can refer to any data (including BU identifiers) associated with the transaction to derive the appropriate accounting.
Define Business Units
Setup and Maintenance > Financials > Define Common Applications Configuration for Financials.
Business Unit Definition Considerations
1. How will you structure your ledgers, legal entities, and business unit rollups?
2. Are there financial reports that need to be generated by business unit?
3. How can you set up your departments or business unit accounts to achieve departmental hierarchies that report accurately on your lines of business?
4. What reporting do you need to support the managers of your business
5. units, and the executives who measure them?
6. How often are business unit results aggregated?
7. What level of reporting detail is required across business units?
Manage Business Units
· A business unit represents a unit of an enterprise that performs one or many business functions and can be consolidated in both a managerial and legal hierarchy.
· A business unit can process procurement transactions on behalf of many legal entities.
· A business unit is used to partition your sub-ledgers.
· A business unit is similar to the Operating Unit in prior versions of Oracle, with additional functionality.
Oracle Fusion Financials facilitates independent balance sheet rollups for legal and management reporting by providing the ability to use up to three balancing segments. Hierarchies created using the management segment can provide the divisional results.
For example, it is possible to define management segment values to correspond to business units and arrange them in a hierarchy where the higher nodes correspond to divisions and subdivisions.
Use business units in the following ways:
· Management reporting
· Processing of transactions
· Security of transactional data
· Reference data definition and sharing
Reference Data Sharing
Share your reference data (setup data) by grouping them into reference data sets and associating them with one or more business units. Being able to share reference data across business units enables faster and easier definition and maintenance of setup data, eliminates duplication and ensures a single source of truth for setups. For example, an organization has several business units and each business unit has a set of payment terms that can be applied to a customer invoice. Instead of each business unit creating and maintaining multiple sets of the same payment terms, you can define the payment terms reference data at the organization level and stripe that data into partitions (create reference data sets) so that the different payment terms can be assigned to each business unit.
If your enterprise has country-specific requirements that affect your reference data, consider creating separate reference data sets and business units to meet these local requirements.
Shared Services
The setup of business units provides a powerful security construct in the applications by creating a tight relationship between the functions a user can perform and the data that a user can process. This security model is appropriate in a business environment where local business units are solely responsible for managing all aspects of the finance and administration functions.
In a worldwide deployment, this tight relationship provides an internal control over inappropriate processing.
For example, in traditional local operations, an invoice of one BU (a system representation of, perhaps, a company in a country) cannot be paid by a payment from another (a system representation of, perhaps, a different company in a different country). This would amount to tax fraud.
Oracle Fusion Financials; hashtag#Oracle, hashtag#Business Unit, hashtag#Enterprise Structure
By contrast, in a Shared Service Center environment, processes that allow one company to perform services for others, with appropriate intercompany accounting, require that users access the data of different companies, each complying with different local requirements. There are two types of relationships:
· Service/Provider Model - You can define relationships between business units to outline which business unit provides services to the other business units. Your business units that have the requisitioning business function can define relationships with business units that have the procurement business function enabled. If you operate in this model, consider minimizing the number of business units assigned to your primary ledgers because security considerations might not be as prominent in the case of a shared service center.
· Non Service/Provider Model – Each business unit performs all business functions throughout the transaction lifecycle (business units do not provide services to other business units). A user in the shared service center could manage more than one of these business units and is assigned access to multiple business units for which he is responsible for transaction processing.
You can isolate your data by BU for security and local level compliance and also enable certain users and processes to work across them. Consider an environment where the orders are taken in several different BUs each representing different registered companies. These BUs segregate the orders and data appropriately. However, all of these orders can be managed from a "shared service" order desk in an outsourcing environment through a single job role.
