Entities

Consider these key points about entities, and read the background information about entities and consolidation. This information can help you decide whether your system requires separate entities and, if so, how many entities are needed.
  • An entity exists for the specific purpose of financial consolidation, reporting, and currency translation. If your company does not require any of those features, then you do not need to define any entities.
  • The chart of accounts must be the same at the sites as at the entity they report to, or the sites must contain a subset of the entity’s chart of accounts.
  • Financial entries can only be entered at the site level. A separate legal, business entity, for example, a holding company, may require a separate site that reports to it.
  • Financial statements can be maintained for either an entity or a site.
  • Each site must have the same base (domestic) currency as the entity it reports to. If you have areas of the company using different base currencies, and those areas must provide financial information to a reporting hierarchy, then you must have at least one entity for each currency. An entity reporting to another entity does not need to use the same base currency; the currency will be translated during financial consolidation to the next entity level.
  • A site can report to only one entity. A site is not required to report to an entity, in which case its financials are not consolidated.
  • Does your company frequently acquire other companies or sell off divisions? If so, it is better to "loosely couple" different divisions/companies, and keep the financial reporting separate (that is, different entities).
  • It is not necessary to have a balanced financial hierarchy.
  • The more levels of entities you have, the more complex the administration. Simpler is better, when possible.
  • Depending on your needs, you may be able to use multi-site groups instead of creating an entity. See Combined vs. consolidated reporting and Grouping sites.
  • In an on-premises environment, an entity can be stored in a separate database, or in the same database as other sites and entities.