When is it an error and when is it a change in estimate?
If the company used the wrong contract terms, omitted a lease entirely or applied the accounting model incorrectly at inception, the issue usually points to an error. If the company received new information, changed assumptions or signed an amendment that genuinely altered the economics, the impact may be treated as a current-period change in estimate or modification.
| Situation | Typical conclusion |
|---|---|
| Lease omitted from the register from day one | Likely prior-period error |
| Wrong discount rate used because contract facts were misunderstood | Likely prior-period error |
| New amendment changes lease term or payments | Usually current-period modification |
| Management updates assumptions based on new information | Usually change in estimate |
Where lease corrections hit the statements
A lease correction rarely affects only one line. It can change depreciation, interest expense, liabilities, right-of-use assets, EBITDA and the note disclosures at the same time. That is why a narrow journal-entry view is dangerous.
- P&L — depreciation and finance cost may need to be recalculated.
- Balance sheet — right-of-use asset and lease liability move together.
- EBITDA — management metrics may change materially, especially under IFRS 16 style reporting.
- Notes — maturity profile, lease commitments and policy wording may all need updating.
What documentation matters most
- full lease register with all contracts and amendments,
- clear memo explaining why the correction is needed,
- calculation showing old vs new treatment and the impact by statement line,
- updated note disclosure and accounting policy where relevant.
Common questions
See how this applies to your company
If you want to assess what this means for your company, prepare for audit or discuss a specific reporting issue, speak directly with a statutory auditor.