Control of use
The customer's right to obtain substantially all of the economic benefits from an identified asset and to direct how and for what purpose it is used.
Definition
Control of use is the second key test in the lease definition under IFRS 16 and amended FRS 102. A customer controls the use of an asset when it has both the right to obtain substantially all of the economic benefits from use of the asset, and the right to direct how and for what purpose the asset is used throughout the period of use. If a supplier makes the relevant decisions, the contract is more likely to be a service arrangement rather than a lease.
Why it matters
Control is what distinguishes a lease from a service contract. Getting this assessment wrong can lead to leases being omitted from the balance sheet or service contracts being incorrectly capitalised.
In AuditLease
Lease identification judgements can be documented alongside the lease record in AuditLease and retained as audit evidence.
Related terms
Put this into practice with AuditLease
AuditLease handles IFRS 16 and FRS 102 lease calculations, statutory note generation, journal entries, and audit evidence, so your team spends less time on spreadsheets and more time on judgements.
This definition is for general information only and is not accounting or legal advice. Definitions are based on IFRS 16, FRS 102, and associated guidance published by the IFRS Foundation and the Financial Reporting Council. Users should refer to the applicable accounting standards and their professional advisers for judgement-specific matters.