THE IMPACT OF ADOPTION OF IFRS5 OPERATIONS ON FIRM PROFITABILITY: EVIDENCE FROM PRIMARY DATA USING SEM-PLS.

Abstract

This research examines how the application of International Financial Reporting Standards (IFRS 5), specifically concerning non-current assets classified as held for sale and discontinued operations, influences organisational profitability. The investigation further evaluates the mediating and moderating influences of financial reporting quality, the transparency of financial statements, the degree of managerial commitment to regulatory compliance, and the extent of management's understanding of IFRS within this dynamic. A quantitative cross-sectional approach was adopted, involving a survey distributed among accountants, chief financial officers, and financial managers operating within both listed and unlisted firms across Iraq. Data were obtained from 430 participants through a structured questionnaire designed using validated Likert-scale measures. Structural equation modelling (SEM), implemented via SmartPLS 4, facilitated the assessment of measurement reliability, convergent and discriminant validity, and enabled the examination of direct, mediating, and moderating pathways within the proposed theoretical model. The findings demonstrate that comprehensive disclosures under IFRS 5, enhanced transparency in financial statements, and strong managerial commitment to adherence significantly improve both the quality of financial reporting and overall profitability. Furthermore, the influence of transparency, commitment, and IFRS-based disclosures on profitability is transmitted through improvements in financial reporting quality. Management's awareness of IFRS also directly contributes to profitability while moderating the influence of compliance practices, transparency, and disclosure quality on financial outcomes. These results suggest that technical compliance with IFRS is insufficient in isolation; instead, active managerial engagement, sustained organisational commitment, and ongoing professional development are crucial to maximising the advantages of financial reporting. These insights are particularly valuable for corporate executives, auditors, and regulatory authorities aiming to strengthen the effectiveness of financial disclosures and support enduring profitability.