Which of the following is used for reporting in financial statements?

The average exchange rate type is commonly used in financial reporting to present foreign currency transactions and translate financial statements into a reporting currency. This method provides a way to smooth fluctuations in exchange rates over a reporting period, making it easier for stakeholders to understand the financial performance of a company with international operations.

By applying the average exchange rate, firms can convert their foreign currency financial data into their home currency more consistently and reflect a more stable financial picture. This is especially important for financial statements, where clear and accurate representation of financial health is essential for decision-making by investors, creditors, and other stakeholders.

In contrast, other methods such as multiplier or divisor methods do not directly apply to the processes of translating currencies for financial reporting, and the cumulative translation adjustment specifically refers to the accounting treatment of foreign currency translation adjustments rather than a method for reporting itself.