Dispute Assessment explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Two of the most consequential labels in the ageing schedule are left undefined by the Schedule — and the guidance that fills the gap sets a deliberately evidential test.
The undefined terms
Schedule III requires a split of trade receivables between "disputed" and "undisputed". These terms have not been defined in the Schedule III.
The working definition: a dispute is a matter of facts and circumstances of the case. However, dispute means disagreement between two parties demonstrated by some positive evidence which supports or corroborates the fact of disagreement.
The definition does not stop at disagreement. It requires positive evidence which supports or corroborates the fact of disagreement — something external to the preparer's own judgement.
That cuts both ways in practice. A customer who simply has not paid is not in dispute; slow payment on its own is evidence of nothing but slow payment. Conversely, a company cannot avoid the "disputed" label for a receivable where correspondence, a rejected invoice, a counterclaim or legal proceedings demonstrate the disagreement.
The cross-reference is telling: the Guidance Note points the reader to the term "dispute" as defined under the Insolvency and Bankruptcy Code, 2016. That body of law has developed an extensive jurisprudence on what constitutes a genuine pre-existing dispute as opposed to a defence raised to resist a claim — and the same evidential discipline is being imported here.
Dispute and credit risk are separate questions
In case there are any disputes, such fact should also be considered while assessing the credit risk associated with the respective party while computing the impairment loss. However, a dispute might not always be an indicator of counterparty's credit risk and vice versa. Hence, both of these should be evaluated independently for the purpose of making these disclosures.
| Situation | Dispute status | Credit assessment |
|---|---|---|
| Financially strong customer contesting a quality claim | Disputed | May remain considered good — the counterparty can pay |
| Customer in financial difficulty who accepts the invoice in full | Undisputed | May be credit impaired — the counterparty cannot pay |
| Customer disputing an invoice while also in distress | Disputed | Assessed on its own facts under Ind AS 109 |
A dispute affects whether the amount is owed; credit risk affects whether it can be collected. The two disclosures answer different questions, which is why the same receivable is classified twice on different axes.
The reconciliation between the two axes
Because both classifications cover the same population, they must agree in total. The amounts presented under disputed and undisputed categories for each category of credit profile should add up and match with the total amount presented in a separate disclosure for the same category of credit profile.
So "undisputed — considered good" plus "disputed — considered good" must equal "considered good — secured" plus "considered good — unsecured". A failure to reconcile usually means the dispute assessment and the credit assessment have been run over different populations.
Making the judgement
- Identify receivables where there is disagreement between two parties.
- Test each for positive evidence corroborating the disagreement.
- Classify as disputed or undisputed on that basis alone.
- Separately assess credit risk under Ind AS 109, taking the dispute into account as one input but not as a conclusion.
- Reconcile the totals across both disclosures for each credit profile.
Common mistakes
- Treating every overdue receivable as disputed.
- Automatically classifying a disputed receivable as credit impaired.
- Recording a dispute on management assertion without corroborating evidence.
- Producing a dispute assessment that does not reconcile to the credit sub-classification.