When is the translation method used for financial statements?

The translation method is used when converting financial statements from the functional currency to the reporting currency. This occurs because the financial statements of an entity that operates in a foreign currency need to be presented in the currency of the financial reporting entity, typically for consolidation purposes or when an entity is required to report in a specific currency.

The translation process involves converting all assets, liabilities, income, and expenses into the reporting currency using the appropriate exchange rates, such as the current exchange rate at the balance sheet date for assets and liabilities and average exchange rates for income and expenses during the reporting period. This ensures that the financial statements reflect the economic realities of the entity's operations when viewed in the context of the reporting currency.

The other options relate to different aspects of currency conversion or do not align with the terminology of the translation method. For instance, restating from the reporting currency or from functional currency to reporting currency does not apply in scenarios where the translation method specifically addresses the currency conversion process for external presentation, which consolidates underlying financial data into a common reporting currency.