Right to direct use
The customer's right to decide how and for what purpose an identified asset is used throughout the period of use.
Definition
The right to direct use is the second element of the control of use test. A customer has the right to direct use when it can change how and for what purpose the asset is used throughout the period of use — for example, deciding where goods are transported, or how machinery is deployed. If the relevant decisions are predetermined and the customer cannot change them, this right may not exist.
Why it matters
Without the right to direct use, control cannot be established, and the contract is unlikely to be a lease. This is particularly relevant for transportation, warehousing, and infrastructure contracts.
In AuditLease
Supports lease identification evidence and audit documentation held in AuditLease.
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.