There are many changes in how organization units are defined and used in R12. An Organization can represent a Ledger, a Business Group, a Legal Entity, an HR Organization, an Operating Unit, and an Inventory Organization. You may define the relationships among organizations.

A Business Group is the highest level in the organization hierarchy structure, usually representing the consolidated enterprise, an operating company, or a major division. The business group secures the employee information in all applications except for HR. For example, when you request a list of employees for approvals or expense reports, you will see all employees assigned to a business group. This is a little bit confusing, because within the HR applications, you can assign a security profile at the HR organization level providing a much more granular view of confidential information such as salaries or social security numbers.

The concept of a Legal Entity is much more developed in R12 than it was in 11i. A legal entity is the organization unit level at which you report taxes and maintain the corporate banking relationships. The LEGAL_ENTITY_ID column is added to the transaction tables in 12, allowing the ability to track transactions at a Legal Entity level. In R12, you assign a Legal Entity to a Ledger instead of to a Set of Books. It is recommended that you assign one (or more) balancing segment values in your chart of accounts to a legal entity.

An HR Organization typically represents the functional management or reporting groups within a business group. You may also define HR organizations for tax and government reporting or for third-party payments.

The Operating Unit is tied to a ledger (instead of a Set of Books) and, as it was in R11, continues to partition transactions. A ledger can have many operating units assigned to it. Responsibilities determine the security for operating units. A responsibility can access only the transactions for the operating unit(s) to which it has been assigned. An operating unit also controls access to reports and concurrent requests. If you set up a profile option MO: Operating Unit, then the responsibility can only access a single operating unit. If you want a responsibility to access multiple operating units, then you must define a security profile with multiple operating units assigned and assign it to the MO: Security Profile option. The MO: Default Operating Unit option also allows you to specify the default operating unit for the transactions entered by that responsibility. Operating units are not directly associated with legal entities, though they are assigned to a ledger and to a default legal context (Legal Entity). A user can assign any operating unit to a transaction or copy transactions to a different operating unit if access to the operating unit is authorized by the security profile for the responsibility.

With the new Multiple Organization Access Control (MOAC) feature in R12, transactions may be posted to different operating units and legal entities from a single responsibility. In order to do this, you set up a security control (MO: Security Profile) to assign multiple operating units and legal entities to a single responsibility. An Inventory Organization is the organization that manufactures or distributes products or for which you track inventory transactions and balances.

An inventory organization is associated with a parent operating unit, but can serve other operating units under a different ledger. As such, each inventory organization is attached to a legal entity and a ledger. You can specify the inventory organizations that are available for each responsibility. You can enter purchase orders and assign for receipt any inventory organization. Your purchase order operating unit and receiving inventory organization can be in different ledgers to receive against a purchase order. 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.

Other organization structures may be set up to reflect hierarchies in different subledgers. For example, you can define organizations for project expenditures to manage project control requirements in Oracle Projects. Oracle Assets uses asset organizations to perform activities for a specific Oracle Assets corporate book.

Some information is set up at the organization unit level, while other data is set up once for the entire E-Business Suite. All flexfield definitions, customer and supplier headers, Oracle Assets, General Ledger, Oracle Inventory, and Oracle Manufacturing products are set up only once in the instance. Oracle Cash Management, Accounts Payable, Purchasing, Accounts Receivable, Order Management, Project Accounting, and Sales & Services are set up at the operating unit level. Site information for suppliers and customers is also at the operating unit level. The following shows the data that must be set up for each operating unit:

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