A business or non-business construct that is not constituted as a legal entity. The concept of virtual entity is commonplace in situations where financial items (assets, liabilities, revenues, etc.) for a pool or a category of stakeholders are segregated and isolated from those of others’ (whether a corporate entity or other stakeholders) for certain purposes such as accounting and financial reporting.

A legal entity is established as per law requirements and has its own legal personality. It can enter into contracts, buy and sell, lease and take on lease, invest and deploy economic resources and take part in legal action, etc. As for a virtual entity, it does not exist by its own, but rather in the books of account and accounting system for its own financial reporting and calculation of profits and losses, and consideration of other aspects (e.g., provisioning, attribution, etc.)