Variable consideration is a concept from ASC 606 and IFRS 15 that addresses revenue components whose final amount is not fixed. Companies must estimate variable consideration and include it in the transaction price only to the extent it is highly probable no reversal will occur.

Example: A SaaS vendor offers a 10% rebate if a customer renews for three years. This rebate is variable consideration that must be estimated and accounted for at contract inception, reducing the recognized revenue accordingly.