When measuring variable consideration under IFRS 15 for real estate sales, which approach is commonly used?

• A. Use the most likely amount only.
• B. Use expected value or the most likely amount.
• C. Use the average of all potential amounts.
• D. Ignore variable consideration entirely.

Answer: (B)

Variable consideration in real estate sales arises when the final price depends on future events like price concessions, incentives, or post-sale adjustments. IFRS 15 requires estimating this consideration using a method that best predicts the amount the entity will ultimately receive. There are two accepted approaches: the expected value, which is the probability-weighted sum of all possible outcomes, and the most likely amount, which is the single outcome with the highest probability. You choose the method that provides the most accurate forecast of consideration. Revenue is recognized for that estimated amount but only to the extent that it is highly probable that a significant reversal will not occur when uncertainties are resolved, and you update the estimate as new information becomes available. This is why the common approach is to use either the expected value or the most likely amount.