Outgoing SEC Commissioner Kathleen Casey says the Securities and Exchange Commission must decide to incorporate International Financial Reporting Standards into U.S. capital markets, yet give smaller companies some options to continue following Generally Accepted Accounting Principles.

In a keynote address to the Society of Corporate Secretaries and Governance Professionals, Casey said the SEC is slated to make a decision on IFRS this year, “and we can no longer kick the can down the road.” Casey, whose five-year term is about to expire, outlined numerous benefits that the United States will notice if and when U.S. public companies eventually follow IFRS for preparing their U.S. financial statements. In addition to the benefits, “the risks of not moving forward with IFRS for U.S. issuers are simply too great,” she said.

Casey said capital markets are already global, and an increasing number of U.S. investments will be made in IFRS-reporting entities in the coming years. The SEC has already determined IFRSs are “high quality” standards, she said, deeming them so when the SEC allowed IFRS companies to report results without reconciliation to U.S. accounting rules.

Following a single set of accounting standards globally will reduce the reporting burdens and costs for multinational companies, Casey said. It also will enable the United States to play a strong role in further changes and refinements to IFRS. “History has shown us that, in the absence of U.S. involvement and leadership, carve-outs and divergence by individual nations from IFRS, as issued by the IASB, begin to emerge,” she said. “In the absence of a credible step by the United States to increase its use of IFRS, however, our ability to influence IFRS, and thus ensure their continued quality and comparability, will quickly dissipate.”

To critics who worry that the United States will hand over its sovereignty to the International Accounting Standards Board, which has the authority to revise IFRS, Casey said the SEC will always be the decision-maker when it comes to financial reporting standards in the U.S. And for those concerned that small companies will be overly burdened with no upside benefits, Casey said, “It makes sense in my view to allow these issuers to opt out of IFRS, at least initially, if not permanently.”

The SEC is hosting a roundtable today to hear views on a number of IFRS adoption and incorporation issues before it makes its long-promised determination on when and how the United States will begin to work from the international accounting rulebook.