How can we tell:
to use either FSG Financial or FSG Standard report in a scenario?

Simple answer to you question is that if your requirements are not met by Standard reports then you will have to create your own reports using either FSG Tool or Oracle Reports Tool or some other technology. You will choose FSG Tool as it is easier to use and maintain reports.

FSG Tool is used to create financials reports like Balance Sheet, Income Statements, Cash Flow statements, etc. You can also use this tool to create any report that display balances.
Standard reports are mainly used for day to day operations and mostly display detailed information. FSG reports cannot display information other than balances like journals, batches, created by, creation date, etc.