Sensorless control of PMSM for mid and high speed range is typically based on back-EMF evaluation. Magnetic saturation has to be considered to achieve good position estimation results. To do so the flux versus current characteristic has to be stored in a look-up table or approximated by easy mathematical functions in the sensorless drive controller. The PMSM models typically used for back-EMF based sensorless control do not consider the impact of iron losses. Iron losses, however, cause steady state position estimation errors which increase in value with the rotational speed of the machine. In this paper the impact of iron losses and parameter errors is investigated. By including the iron losses in the PMSM model an identification strategy can be found which makes it possible to calculate the expected iron loss related errors for sensorless operation. Comparison of the position estimation errors calculated from the identified parameters show good accordance with position estimation errors obtained from measurements in sensorless control operation, if the machine temperature is approximately the same. But it was found that the error is significantly temperature dependent.