economicz

rus1bus1 for 8 you mean HTM are recorded at cost including transaction costs right?

ok let me try to explain 10.

Let A = 100, L = 70 ==> E = 30 all expressed in lb, the FC. So we have a net asset exposure. Say lb is the foreign currency and $ is the domestic currency. Exchange rate goes from $1/lb to 2$/lb. So FC has appreciated it.
What happens to translated assets? ==> 2 * 100 = 200.
Liabilities? ==> 2 * 70 = 140.
Equities? ==> Including the +CTA adjustment is 60.

As you can see both Assets and Liabilities are going up.

Your statement "Asset values are directly related to Exchange Rates and Liabilities are Inversely related to Exchange Rates." should be refined to "When FC appreciates, there is a benefit from an assets point of view but a detriment from a liability point of view". It is not Liabilities are inversely related to exchange rate per se, it is just that they have a -/+ impact if exchange rates rise or fall.

another way to look at this is to view assets as exports and liabilities as imports. When the FC appreciates, we gain from exporting (asset) but have to pay more when we need to import (liability).

bottom line is liabilities are increasing when exchange rates increase, but this is detrimental to the firm.