The Securities and Exchange Commission took the next step in the ongoing globalization of the world economy. The SEC voted unanimously to propose allowing companies outside the U.S. to file financial results using international financial reporting standards (IFRS) without reconciliation to U.S. generally accepted accounting principles (GAAP).

This is a major earthquake in the world of financial reporting! You cannot have two standards of financial reporting in the United States. It is either GAAP or IFRS. It cannot be both. I believe that this move means the SEC has already chosen IFRS. This is simply the beginning of a transition period. The SEC had to make this move.

All the other major American financial institutions have embraced globalization in some form. The Federal Reserve and the other central banks of the world have increased their coordination with one another. At the beginning of this decade, the central banks all added liquidity to the global economy by lowering rates and now have cautiously raised rates. The major financial exchanges are either merging or forming alliances.

Accounting is simply the next domino to go in this trend of global convergence. It is necessary for the U.S. to maintain its leadership position in the financial world and to remain competitive in terms of stock listings on financial exchanges.

Many may consider this move a major decline in the United States' economic and financial power in the world. I strongly disagree. Remember the statutory authority to set accounting standards for public companies still rests with the SEC. This has not and will not change.

The SEC has had problems with GAAP in the past and has negotiated with the Financial Accounting Standards Board (FASB), which regulates GAAP, to resolve these issues. I am sure that it will do the same with the International Accounting Standards Board (IASB), which regulates IFRS. Both are private organizations. The SEC is merely substituting one industry organization for another.

If the SEC has problems with existing accounting principles, it can always impose additional reporting requirements. This will not change with use of IFRS. The SEC is merely accepting the reality of a new negotiating partner.

Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.