Set Up Legal and Reporting Entities
Legal entities and reporting entities are both set up in Setup, in the Organization group, and they do different jobs. A legal entity is a company in your own corporate structure, held in the shared registry connected to your business. A reporting entity is the accounting unit leases are accounted under, with its own functional currency, fiscal calendar, and policy election sets. This article walks through setting up each one.
Which one you need
Legal entity | Reporting entity | |
|---|---|---|
What it is | A company in your corporate structure, in the shared registry. | The accounting unit leases are accounted under. |
How it connects to leases | Other organizations and people in the registry appear as lease parties such as landlords and guarantors; parties to agreements such as guaranties are legal entities. | Accounting is reported for a reporting entity, so each lease's books report under one. |
What you configure | Names, legal form, market status, establishment details, functional currency, addresses, identifiers, and people. | Functional currency, fiscal calendar, chart of accounts mapping, accounting standards, and policy election sets. |
The same lease can measure differently under two reporting entities with different policy elections. For the accounting context, see How lease accounting works.
Set up a legal entity
Start from the Organization registry search in Setup. Most Setup pages need Setup access.
In Setup, open Organization, then Legal Entities, and choose New legal entity.
Search by name or website, or paste a tax or registry number to jump straight to its holder.
If the search finds the company, select it and choose Continue: its entity page opens. If it is new, choose the option to add it as a new organization.
In the New Organization form, enter the required Legal Name and Address. Enter Website, or check This organization has no website. Optionally add Display Name, Legal Form (such as Corporation, LLC, or Partnership), and an Identifier Type and Identifier; an identifier value needs its Issuing Country.
Choose Add to registry, then Continue to open the new entity's page.
On the entity page, choose Edit and complete the Basics tab: Market Status (Public or Private), Country of Establishment, Establishment Date, Functional Currency, and Industry Code (NAICS). These fields are optional.
Use the entity page's Addresses, Identifiers, and People tabs to add more addresses, identifiers such as a Federal Tax ID or DUNS number, and the people who work for the entity, who become available as signatories and contacts.
If the address lookup does not find the address, enter it manually: Country and Street Address are required, and City, State / Region, and Postal Code requirements depend on the country.
The registry guards against duplicates. If the identifier you enter already belongs to another organization, that organization is selected instead of creating a record. If the name matches an existing one, a Possible Duplicate warning lets you add the record anyway, and two records that turn out to be one company can later propose a merge. For the registry's other records, see Create and Connect Organizations and People.
Set up a reporting entity
Before you start: the chart of accounts mapping and each policy election set you assign must already be published, and setting up reporting entities requires Setup access.
In Setup, open Organization, then Reporting Entities, and choose New reporting entity.
In Basics, enter the Name (required, unique, up to 255 characters) and the Market Status: Public or Private.
Choose the Fiscal Calendar. Thirteen-period fiscal years are calendar choices, not a separate setting, and the available calendars depend on the calendar records in your workspace.
Choose the Functional Currency: USD, CAD, GBP, or EUR.
Choose the Chart of Accounts Mapping.
In Standards & Policy Elections, choose the Accounting Standards. ASC 842 is the default and IFRS 16 is available; FRS 102 appears as coming soon and cannot be selected yet.
For each selected standard, choose its policy elections, such as ASC 842 Policy Elections. The choices are filtered by the standard and the functional currency.
Save the entity.
A Public entity cannot use an election that sets a risk-free discount rate. Saving one reports: "The ASC 842 accounting standard does not allow the use of a risk free incremental borrowing rate for Public companies. Please confirm your company's status and if you are Public - configure a different IBR."
Replicate, archive, or unarchive a reporting entity
To start a new entity from a copy, choose Replicate in the list row or on the entity's View page and enter a unique name. The copy carries the fiscal calendar, market status, functional currency, straight-line proration method, effective and end dates, status, chart-of-accounts mappings, and each standard's policy elections, including their effective dates. You land on the new entity's View page.
Archive is available in the list row and the page header, and requires confirmation. Archiving sets the status to Archived. Unarchive sets the status to Ready for Use, not to whatever it was before. The list's status filter defaults to In Use and Ready for Use, so archived entities stay hidden until you include Archived in the filter.
Where this fits
When a lease is published, you establish its book under a standard and accounting is reported for a reporting entity. See Publish your first measurement for the lease-side steps.