Variable consideration is a concept under IFRS 15 that arises when the amount of consideration in a contract for the sale of goods or services is uncertain. This can occur for various reasons, including discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.

In terms of its treatment under IFRS 15, variable consideration is included in the transaction price to the extent that it is 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.

The entity is required to estimate the variable consideration by using either the "expected value" or the "most likely amount," depending on which method better predicts the amount of consideration to which the entity will be entitled.

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

Regardless of the method used, the entity must reassess these estimates at each reporting date.

It's important to note that there is a constraint on the inclusion of variable consideration in the transaction price. An entity can only include an amount of variable consideration in the transaction price if it is highly probable that its inclusion will not result in a significant revenue reversal in the future when the uncertainty associated with the variable consideration is resolved.