Under IFRS 15, variable consideration is part of the transaction price, which is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.

Variable consideration can arise from discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items. The promised amount of consideration may be variable because of the outcome of future events or uncertainties that affect the amount or timing of the consideration.

To estimate variable consideration, IFRS 15 specifies two methods:

1. Expected Value Method: The expected value is the sum of probability-weighted amounts in a range of possible consideration amounts. This method might be appropriate if an entity has a large number of contracts with similar characteristics.
2. Most Likely Amount Method: The most likely amount is the single most likely amount in a range of possible consideration outcomes. This method might be appropriate if the contract has only two possible outcomes (e.g., a performance bonus will either be achieved or not achieved).

Once an entity estimates the amount of variable consideration to which it expects to be entitled, it must consider whether it's highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. If it is highly probable that a significant reversal will occur, the entity should constrain (limit) the amount of variable consideration included in the transaction price.

In terms of revenue recognition, variable consideration can impact the timing and amount of revenue recognized. It requires the entity to use significant judgment and make estimates that may need to be updated in each reporting period.

For instance, if an entity sells goods with a right of return, it would estimate the amount of goods expected to be returned and recognize revenue for the transaction price reduced by this estimated amount. The entity would update this estimate at the end of each reporting period.