<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549


                                   FORM 10-K

(Mark One)
[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 [Fee Required]

     For the fiscal year ended  DECEMBER 31, 1995 or
 
[_]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 [No Fee Required]

 For the transition period from ____________ to ____________

                        Commission file number  0-14953
                                                -------

                               ACUSON CORPORATION
             (Exact name of registrant as specified in its charter)


          DELAWARE                                   94-2784998
----------------------------                ---------------------------------
  (State of Incorporation)                  (IRS Employer Identification No.)

                              1220 CHARLESTON ROAD
                  P. O. BOX 7393 MOUNTAIN VIEW, CA 94039-7393
                    (Address of principal executive offices)

     Registrant's telephone number, including area code, is (415) 969-9112
                                                            --------------

          Securities registered pursuant to Section 12(b) of the Act:

 
 Title of Each Class     Name of Each Exchange on Which Registered     
----------------------   -----------------------------------------
     Common Stock                  New York Stock Exchange
  $.0001 par  value

          Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock Purchase Rights

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.     Yes   X     No
                                                   ---       ---

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S) 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.  [X]

  The aggregate market value of the Registrant's voting stock held by non-
affiliates on March 1, 1996 (based upon the NYSE closing price on such date) was
approximately $300,060,000.

  As of March 1, 1996, there were 27,315,671 shares of the Registrant's Common
Stock outstanding.
<PAGE>
 
PART I
ITEM 1 
BUSINESS


GENERAL BUSINESS

Acuson Corporation ("Acuson" or the "Company") was incorporated in the State of
Delaware in 1981.  The Company designs, manufactures and markets premium quality
medical diagnostic ultrasound imaging systems and image management products.
Set forth below is a description of the Company's business. This description
includes forward looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in the "Investment Risks" section set forth below as
well as in the sections entitled "Competition" and "Government Regulation"
below.

The Company believes its systems provide superior diagnostic performance,
versatility, upgradability and reliability and can enable the physician to make
earlier, more accurate and/or more confident diagnoses.  The Company focuses its
efforts on the following major hospital-grade ultrasound market segments:

   UNITED STATES GENERAL IMAGING. Acuson entered this largest U.S. segment in
   1983. Major sub-segments of this market include:

     RADIOLOGY.  Major applications include examinations of abdominal organs,
     the gastrointestinal tract, the urinary tract and small parts such as the
     breasts, testes and thyroid.  Pediatric examinations are of growing
     interest in this segment.

     PERIPHERAL VASCULAR.  Acuson introduced system capabilities in 1985 for
     this segment which focuses primarily on examinations of the vessels of the
     leg and neck.

     OBSTETRICS/GYNECOLOGY.  Acuson has provided premium quality hospital grade
     products for Ob/Gyn applications beginning with the Company's first system
     shipments in 1983.  Applications center on examinations of the female
     reproductive system and the developing fetus.

   UNITED STATES CARDIOVASCULAR.  Acuson entered this second largest segment in
   1988.  Cardiology applications center on examinations of the heart and
   proximate vessels, while cardiovascular applications extend to include the
   entire vascular system.

   INTERNATIONAL.  Acuson began its international efforts in 1984 with the
   establishment of its first international sales subsidiary.  The Company
   distributes its products in most of the developed world through fourteen
   direct international sales subsidiaries and a number of foreign distributors.
   International markets include the same range of clinical ultrasound
   applications as the domestic market.

Acuson's products are based on specialized hardware, software and transducer
technologies which the Company considers to be proprietary.  Acuson's hybrid
analog/digital computer systems are specially designed and produced by the
Company to electronically form high resolution, real-time ultrasound images
under software control.  These systems utilize a variety of application-specific
transducers, almost all of which are designed and fabricated by the Company, to
send and receive ultrasound beams with superior precision.

Acuson introduced its first generation system, the Acuson(R) 128, in 1983, and
sold more than 4,000 of these systems during the next seven years. Over the life
of the Acuson 128, the system grew to support many additional new ultrasound
modes, transducers and other capabilities.

Acuson's second generation system, the Acuson 128XP(TM), was introduced in July
1990.  A more configurable system than the original Acuson 128, the 128XP
provides a greater number of application-specific configurations for a broader
range of clinical uses.  This greater flexibility has allowed the Company to
address a wider spectrum of clinical specialties and pricing segments in both
the international and domestic ultrasound markets.

During 1995, Acuson introduced ART/TCR, an enhancement to the Company's Acoustic
Response Technology (ART).  Tissue Contrast Resolution (TCR) allows users to
more easily see subtle differences in tissue textures and 

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densities, and provides improved image quality across a range of transducer
types and clinical applications. ART/TCR is available on new Acuson systems or
as a field-upgradable option for existing Acuson customers. Also during 1995,
the Company introduced the Acuson 128XP/4(TM) Advanced system. This new version
of the mid-range 128XP/4 system includes improved imaging, color Doppler, and
shared service capabilities.

Acuson believes its systems provide the following major benefits when compared
with other ultrasound technologies.

          IMAGING PERFORMANCE. Acuson's systems are designed to provide superior
          image quality through greater detail resolution, contrast resolution
          and image uniformity. In addition, Acuson systems provide superior
          clinical sensitivity for a broad range of Doppler and color Doppler
          applications, which are used to detect, measure and depict blood
          flows.

          VERSATILITY.  All Acuson systems can operate in all major high
          resolution imaging formats and in all major ultrasound modes.  As a
          result, Acuson systems can offer superior performance for a broad
          range of examinations that are typically of interest to ultrasound
          physicians.

          RELIABILITY. The Company's thousands of domestic systems under
          warranty or full-service contract have achieved greater than 99.9%
          cumulative uptime since 1983.

          UPGRADABILITY. Every Acuson system shipped since 1983 can be upgraded
          to perform every diagnostic capability the Company now offers on new
          systems. In many cases, the changes are accomplished simply with new
          software. In other cases, customers purchase new hardware options or
          transducers, which also include new software to control performance.

          EASE OF USE. Acuson's philosophy of system design and its system
          architecture allow for greater ease of use. For example, Acuson's
          systems avoid menus where possible in favor of direct access to
          functions via dedicated keys. Further, Acuson's high level computer
          control allows the user, by entering a few simple keystrokes, to
          orchestrate the many detailed imaging parameter changes required to
          optimize high performance ultrasound examinations in real time.


DIAGNOSTIC ULTRASOUND

Ultrasound was introduced for medical imaging purposes in the mid-1960's and has
been characterized by rapid technical development and increasing breadth of
application by physicians.  Medical diagnostic ultrasound systems use low power,
high-frequency sound waves to produce real-time moving images of soft tissues,
internal body organs and blood flows.  Ultrasound systems generate ultrasonic
waves via the electrical stimulation of specialized crystals known as
transducers.  Traveling at a constant speed, these sound waves propagate through
the body where they are reflected by tissues and surfaces, such as the
boundaries between organs and blood.  The reflected sound echoes are received by
the transducer and processed in the system.  The resulting images are displayed
on a high-resolution monitor.

Ultrasound is a noninvasive technique which, unlike X-ray, does not use ionizing
radiation, and is generally considered safe by physicians.  Although ultrasound
signals cannot effectively penetrate air or bone, it is often the imaging
technique of choice for many soft tissues and has common cardiac, abdominal
(e.g., liver, kidney, spleen and gallbladder), gynecological, obstetrical,
urological (e.g., prostate), and peripheral vascular applications.  Major uses
include the detection of abdominal cancer, and the diagnosis of heart disease
and fetal abnormalities.

Acuson regards the United States hospital grade ultrasound market as comprising
two principal segments, General Imaging and Cardiovascular, which are
differentiated by the type of physician most commonly using the ultrasound
equipment. Acuson systems can be tailored with software and transducers to offer
premium performance in each segment. Outside the United States, high performance
ultrasound is often performed by an Internal Medicine department, and systems
are often sold with a combination of clinical capabilities.

The hospital and clinic market uses sophisticated ultrasound systems with broad
clinical capabilities and is Acuson's major focus.

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The remainder of the ultrasound market uses systems with limited capabilities
for conducting simple exams in the doctor's office. Acuson sells some systems
with basic configurations into this segment.


ULTRASOUND TECHNOLOGIES

The Company believes there are currently a number of system technologies and
display formats, including those used by the Company, that are factors in the
market for hospital and clinic grade systems, such as:

   SYSTEM TECHNOLOGY. In the late 1970's, moving ultrasound images were first
   created by the use of "mechanical sector" technology. This type of technology
   uses motors to mechanically rotate or vibrate the transducer elements,
   sweeping the ultrasound lines as a result of the rotation or vibration. A
   further development of this technology, designed to improve image quality, is
   the "annular array," a mechanical sector transducer with a number of
   concentric transducer elements.

   All-electronic transducers and systems, which were first widely accepted in
   the early 1980's, sweep ultrasound lines without utilizing moving mechanical
   parts, in ways similar to the method by which advanced phased array military
   radar sweeps radar signals without moving parts. The ultrasound lines in all-
   electronic transducers are "steered" from the transducer face with
   electronics by using many stationary transducer elements and precisely
   changing the timing of sending and receiving sound from these elements.

   All-electronic ultrasound designs are optimal for spectral and color Doppler,
   and can offer newer imaging formats such as Vector(R) array, linear array and
   curved array. All-electronic transducers are by far the most frequently used
   for high performance ultrasound applications involving Doppler and color
   Doppler imaging. While some systems still utilize motor driven transducers,
   or a combination of motor driven and all-electronic transducers, all of
   Acuson's transducers are all-electronic.

   IMAGE FORMATS. High performance ultrasound transducers provide a number of
   different formats. Generally, different formats are required or preferred for
   particular types of clinical applications.

       SMALL FOOTPRINT TRANSDUCERS.  Because ultrasound signals cannot
       effectively penetrate air or bone, the "acoustic windows" into the body
       are often limited by the need to image around the ribs or other bones,
       the lungs or bowel gas, bandages, or other impediments.  When access is
       limited, the physician generally will select a transducer with a small
       imaging surface, or "footprint."  Small footprint transducers commonly
       are produced in three formats:

          SECTOR ARRAY  This format produces a pie-shaped image which is narrow
          at the skin line and wider as it goes deeper into the body.
          Implemented properly, sector transducers are capable of high
          resolution imaging.  However, because their field of view is so narrow
          near the skin line, sector format transducers have a limited ability
          to image structures in the near field (i.e., close to the skin's
          surface).  This format can be provided by either mechanical or all-
          electronic transducers.

          TIGHTLY CURVED ARRAY.  A form of the all-electronic curved array (see
          below), this format allows for a wider near field of view than sector,
          while generally offering inferior lateral resolution at depth compared
          to an equivalent sector transducer.

          VECTOR ARRAY.  Introduced by Acuson with the 128XP system in 1990,
          this proprietary format offers uncompromised resolution with a wider
          field of view than sector at all depths. Because it combines high
          resolution and a larger field of view in all-electronic transducers
          capable of color Doppler, Acuson believes that Vector array is the
          ideal format for small footprint ultrasound applications.

       MEDIUM AND LARGE FOOTPRINT TRANSDUCERS. Medium and large footprint
       transducers are often used when wider imaging access is available, and
       are commonly produced in the following two formats:

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       LINEAR ARRAY. Linear arrays are all-electronic transducers capable of
       imaging a rectangular field of view. Implemented properly, they are
       capable of high resolution imaging, although many systems (typically sold
       for use in the doctor's office) incorporate linear imaging with much
       poorer resolution.

       CURVED ARRAY. Curved array transducers are essentially linear transducers
       that have been bent to offer a convex geometry. As a result, they can
       offer a larger far field of view for the same size footprint than an
       equivalent linear transducer, though often with some compromises in image
       quality or the degree of image artifact present.

   ENDOCAVITY TRANSDUCERS. Endocavity transducers are widely used to obtain
   superior imaging and Doppler examinations through closer access to internal
   body organs. Endovaginal probes are widely used for Ob/Gyn examinations,
   while endorectal probes are frequently used to examine the prostate and the
   rectal wall. Transesophageal probes are used in cardiology to examine the
   heart, and also are used to monitor the heart during surgical procedures.

FREQUENCIES. Ultrasound systems typically offer a number of single center-
frequency transducers at different frequency levels. Higher frequency
transducers can offer greater resolution than lower frequency transducers, but
cannot image as deeply into the body. In general, therefore, in selecting
transducers there is a tradeoff between depth of penetration and image
resolution.

In actual clinical practice, the clinician, when beginning an examination, will
often select the highest frequency transducer that will have the penetration
required to perform the entire examination. The penetration required is somewhat
unpredictable, and clinicians find it time consuming and inconvenient to switch
transducers. As a result, portions of examinations may be performed at different
frequencies than might be actually desirable.

MODES. The three major modes that are most often used in diagnostic ultrasound
include:

       B-MODE. This mode, often called "grayscale" by radiologists and "2-D" by
       cardiologists, forms black and white images of the anatomy being
       examined.

       SPECTRAL DOPPLER.  Spectral Doppler is not an imaging technique per se;
       rather, it is a way of graphically measuring and graphically displaying
       the velocity of blood flow at a single point through vessels or between
       chambers of the heart.  The measured information is presented graphically
       on a real-time basis, and helps a physician determine, for example, the
       velocity of blood flow through a vessel that is partially blocked or
       through a heart defect.  B-mode ultrasound is most often used to aim
       spectral Doppler ultrasound, so that the physician can see from what part
       of a vessel or the heart the spectral Doppler measurements derive.

       COLOR DOPPLER. Color Doppler superimposes a color-encoded representation
       of blood flow on the anatomical black and white ultrasound image formed
       by B-mode. Blood flow toward the transducer is presented as one color
       (e.g., red) and flow away from the transducer is presented as another
       color (e.g., blue). As a result, color Doppler allows a physician to
       visualize blood flow throughout the field of interest, instead of just at
       a single point as is the case for spectral Doppler.

   Until the 1980's, ultrasound systems were primarily used to image anatomy in
   B-mode. Beginning in the 1980's, the use of spectral Doppler became almost
   universal among hospital grade systems. During the second half of the 1980's,
   color Doppler gained almost universal acceptance in new placements of
   hospital grade cardiology systems. By the early 1990's, new placements of
   hospital grade radiology systems generally included color Doppler as well.


ACUSON'S TECHNOLOGY

Acuson's technology is based on a hybrid analog/digital computer architecture
specially designed and manufactured by the Company to accommodate the
requirements of real-time ultrasound image formation. This basic computer

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architecture was utilized in the Acuson 128 system and also formed the basis for
the Company's second generation system, the 128XP.

All of Acuson's systems utilize 128 independent transmit/receive channels of
ultrasound information, although some specialty transducers may utilize fewer
channels.  Acuson believes that, if utilized properly, 128 channels can offer a
number of benefits over fewer numbers of channels.  Depending on the transducer
design and other parameters, these benefits can include greater lateral
resolution and contrast resolution, as well as decreased image artifact.

Acuson's 128XP systems can operate in all major high resolution imaging formats,
which include sector, Vector array, linear array, tightly curved array and high
performance curved array.  The Company's systems also can provide all of the
major operating modes, which include B-mode, spectral Doppler and color Doppler.
The Company sells approximately 30 different transducers offering a variety of
frequencies, formats and operating modes.

A key element of the Company's computer architecture is Acuson's Dynamic
Computed Lens System(TM), which performs proprietary image formation operations
on the signals from the system's 128 separate transmit/receive channels. The
Acuson Dynamic Computed Lens System electronically focuses at each point of the
field of view in every frame, electronically optimizes the lens aperture at each
focal point, and substantially filters out certain stray reflected sound
captured by more conventional systems, often allowing better contrast
resolution. All of these functions are performed automatically without any
operator intervention in creating up to 50 or more images per second.

Color Doppler is incorporated in the vast majority of Acuson systems sold to all
market segments.  While Acuson did not invent color Doppler, it has made a
number of important innovations in this area.  In 1988, Acuson was the first
company to ship color Doppler systems in a configuration appropriate for a broad
range of radiology examinations, and the Company believes that Acuson systems
have had a major impact in expanding the acceptance of color Doppler for
mainstream radiology applications.

The Acuson 128XP system includes a number of important technologies and system
capabilities, such as the following:

   VECTOR ARRAY offers uncompromised resolution with a wider field of view at
   all depths than sector. It is an advance in computer imaging technology, not
   a change in the transducer itself; as a result, the Vector array capable
   128XP systems introduced in 1990 (or Acuson 128 systems upgraded with the
   appropriate Performance Option Package) can perform Vector array imaging with
   the same sector transducers originally shipped with the Acuson 128 in 1983.

   HIGH PERFORMANCE CURVED ARRAY technology brings Acuson quality and 128
   channel capability to this format. It offers high resolution imaging while
   substantially reducing the far-field drop off and imaging artifacts often
   associated with conventional curved arrays.

   MULTIHERTZ(R) frequency selectable imaging gives, on a single transducer, the
   ability to switch between two or three frequencies for both grayscale and
   color Doppler imaging, simply by pushing a button. Because it makes accessing
   a higher frequency so convenient, Acuson believes that its MultiHertz
   technology makes high frequency imaging more practical across a broad range
   of examinations. Acuson accomplishes MultiHertz imaging through a combination
   of proprietary hardware, software and transducer technologies.

   B-COLOR IMAGING is a mode that maps B-mode information in color. Because
   humans can perceive more different colors than they can perceive different
   shades of gray, B-color imaging increases the amount of diagnostic
   information a clinician can perceive from the wide dynamic range of an Acuson
   B-mode image.

   In 1993, Acuson introduced ACOUSTIC RESPONSE TECHNOLOGY (ART) as an available
   upgrade to the 128XP Platform. ART incorporated new image processing
   techniques that increase the amount of imaging and Doppler information that
   the system provides. In 1995, Acuson introduced ART/TCR (Tissue Contrast
   Resolution), a further enhancement of ART-capable systems.

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Acuson attempts to protect technologies that it views as proprietary through a
combination of trade secrets and, where appropriate, copyrights, trademarks and
patents. The Company also relies substantially on its unpatented proprietary
know-how. See "Investment Risks - Patents and Proprietary Technology" for a
detailed discussion as well as certain risk factors.


ACUSON'S PRODUCTS

Acuson offers a variety of product configurations, all of which are based on the
Acuson 128XP system.  Several basic mainframe platforms may be tailored for
cardiovascular, radiology, peripheral vascular and Ob/Gyn ultrasound
applications by combining various transducers, options such as spectral Doppler
and color Doppler, and software packages.

The Acuson 128 system was introduced for radiology applications in 1983.  The
introduction of the Acuson 128XP in 1990 further expanded Acuson's radiology
capabilities.  In general, the 128XP system is more configurable than was the
Acuson 128 system and thus can address a wider market price range than the
previous system.  The XP/4, a color Doppler-capable system and the Company's
most basic radiology configuration, currently sells for a list price of
approximately $100,000. A typical 128XP/10(TM) color Doppler radiology system
configuration, including optional software and transducers, may have a list
price of $170,000 to $200,000.

Acuson introduced the Acuson 128 system for cardiovascular applications in 1988
and followed with the 128XP in 1990.  A basic cardiovascular system
configuration sells for a list price of approximately $120,000 and consists of
the Acuson 128XP with special cardiology applications software, plus one cardiac
transducer and spectral Doppler.  A typical 128XP/10 color Doppler cardiology
configuration, when it includes an option supporting vascular examinations, may
have a list price of $150,000 to $170,000.

The diagnostic capabilities provided on the 128XP are available in addition to
all of the extensive clinical capabilities that were available on the previous
Acuson 128 system.  These capabilities also can be added to existing Acuson 128
systems through Performance Option Packages.

The AEGIS(R) system, introduced by Acuson in October 1992, provides significant
new capabilities for managing and storing ultrasound images and for preserving
the quality of the images' diagnostic information.  By computerizing ultrasound
image and data handling, the AEGIS system can also increase the productivity of
existing ultrasound instruments, reducing overall hospital costs in addition to
improving patient care.  By the end of 1995, more than 70 AEGIS networks had
been installed at customer sites in North America.


MARKETING AND SALES

The Company sells its products primarily to hospitals, private and governmental
institutions and health care agencies, medical equipment distributors and
doctors' offices.  The Company and its subsidiaries employ their own full-time
sales, service and applications staff in North America, selected European
countries, Australia and Japan.  Acuson sells through independent distributors
in other European countries, Asia, South America, South Africa and the Middle
East.

See Note 10 of Notes to Consolidated Financial Statements contained in Item 8
for a summary of operations by geographic region.

The sales process for ultrasound systems typically requires six to eighteen
months between initial customer contact and placement of an order.  On-site
demonstrations are often part of the customer's evaluation process, and
customers frequently make side-by-side comparisons of performance and other
features of competing systems. Acuson employs a staff of applications personnel
who operate the system during sales demonstrations and who also train physicians
and ultrasound technicians on the use of the system after delivery.

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SERVICE

The Company employs a staff of full-time service engineers who service Acuson
systems in North America and in the countries where Acuson has international
subsidiaries.  Service to customers in other international areas is provided
through the Company's independent distributors.

Acuson warrants its products for 12 months, extendible by service contract.  All
domestic systems under Acuson warranty or full-service contracts are guaranteed
to have 99.0% uptime, and such systems have averaged more than 99.9% cumulative
uptime since 1983.

Systems under warranty or service contract receive periodic maintenance by
Acuson service engineers, who also install new system capabilities or software
upgrades and respond to customer service requests. Certain of these services may
be purchased from the Company's service organization by customers who do not
have a service contract with Acuson.

Service was 24.6% of total net sales in 1995.  See Part II, Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations.  See also "Investment Risks - Service" below for certain risk
factors related to the Company's service business.


COMPETITION

Acuson competes primarily on the basis of its major clinical benefits of imaging
performance, ease of use, versatility, upgradability and reliability. The
Company believes that these product capabilities can enable physicians to make
earlier, more accurate and/or more confident diagnoses and also can provide
superior long-term economic value. As do virtually all companies in the
industry, Acuson offers on-site system demonstrations to customers during the
sales process, and customers frequently do their own evaluations of equipment
performance and other factors.  The markets for these products have become
increasingly competitive, and price is more often a factor in the purchase
decision.

The Company's ultrasound equipment competes with systems offered by a number of
companies and their affiliates abroad, including Advanced Technology
Laboratories, Inc., Aloka Co., Ltd., Diasonics, Inc. (a subsidiary of Elbit,
Ltd.), General Electric Company, Hewlett-Packard Company, Hitachi Corporation,
Philips Ultrasound, Inc., Siemens Medical Systems, Inc. and Toshiba Medical
Systems, Inc.  Most of these competitors have significantly greater financial
and other resources and generally compete in more medical imaging and other
market segments and countries than Acuson. The products offered to date by these
competitors in some cases include features and capabilities not currently
offered by Acuson and in some cases are substantially less expensive than
Acuson's products.  See "Investment Risks - Competition" below.

Ultrasound units are generally among the least expensive of modalities such as
conventional X-ray, computed tomography, magnetic resonance imaging and
diagnostic ultrasound imaging.  In addition, in certain applications, ultrasound
offers capabilities that make it the modality of choice regardless of cost.

However, no assurance can be given that such price and/or performance advantages
can be maintained in comparison to other current or future imaging modalities.
In addition, ultrasound systems compete with other imaging modalities for
limited hospital funding.  See "Investment Risks - Ultrasound Market Changes"
below.


PRODUCT DEVELOPMENT

Acuson believes that a continued flow of new products is of great importance to
its success.  Since Acuson's founding, virtually all product development has
taken place at the Company's headquarters in Mountain View, California.  The
Company spent $58.3 million, $70.8 million and $66.4 million on product
development in 1993, 1994 and 1995, respectively. Product development is subject
to certain risk factors. See "Investment Risks - New Products" below.

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GOVERNMENT REGULATION

As a manufacturer of medical devices, Acuson is subject to various regulations
of the United States Food and Drug Administration (the "FDA") and of the
California Department of Health Services, including marketing clearance or
approval of the Company's products by the FDA. The process of obtaining such
clearances or approvals to market products can be time consuming, lengthy,
uncertain and expensive and can delay the marketing and sale of the Company's
products. The review of a premarket approval ("PMA") application generally takes
one to two years from the date the PMA is accepted for filing, but may take
significantly longer. It generally takes from four to twelve months from
submission to obtain 510(k) premarket clearance, but may take longer. The FDA
has recently been more rigorous in its 510(k) clearance process. See "Investment
Risks - Regulation by Government Agencies" below.

Manufacturers of medical devices marketed in the United States are required to
adhere to applicable regulations setting forth detailed Good Manufacturing
Practices ("GMP") requirements, which include testing, control and documentation
requirements.  Manufacturers also must comply with Medical Device Reporting
("MDR") requirements that a firm report to FDA certain adverse events associated
with the Company's devices. The Company is subject to routine inspection by FDA
and certain state agencies for compliance with GMP requirements, MDR
requirements, and other applicable regulations.  The FDA is using its statutory
authority more vigorously during inspections of companies and in other
enforcement matters.  The FDA has proposed changes to the GMP regulations and
has promulgated new MDR regulations, both of which will likely increase the cost
of compliance with GMP requirements.  The Company also is subject to numerous
federal, state and local laws relating to such matters as safe working
conditions, manufacturing practices, environmental protection, fire hazard
control and disposal of hazardous or potentially hazardous substances.  Changes
in existing requirements or adoption of new requirements could have a material
adverse effect on the Company's business, financial condition, and results of
operations.  Although Acuson believes that it is in compliance with all
applicable regulations of the FDA and the State of California, current
regulations depend heavily on administrative interpretation, and there can be no
assurance that the Company will not incur significant costs to comply with laws
and regulations in the future or that laws and regulations will not have a
material adverse effect upon the Company's business, financial condition or
results of operations.  In addition, the potential effects on the Company of
heightened enforcement of federal and state regulations cannot be predicted.

The Federal government regulates reimbursement for diagnostic examinations
furnished to Medicare beneficiaries, including related physician services and
capital equipment acquisition costs.  For example, Medicare reimbursement for
operating costs for ultrasound examinations performed on hospital inpatients
generally is set under the Medicare prospective payment system ("PPS")
diagnosis-related group ("DRG") regulations.  Under PPS, Medicare pays hospitals
a fixed amount for services provided to an inpatient based on his or her DRG,
rather than reimbursing for the actual costs incurred by the hospital.  Patients
are assigned to a DRG based on their principal and secondary diagnoses,
procedures performed during the hospital stay, age, gender and discharge status.

For capital costs for inpatient services, prior to October 1, 1991, Medicare
reimbursed hospitals an amount based on 85 percent of the actual reasonable
costs they had incurred.  On October 1, 1991, Medicare began to phase in over a
ten year period a prospective payment system for capital costs which
incorporates an add-on to the DRG-based payment to cover capital costs and which
replaces the reasonable cost-based methodology.

For certain hospital outpatient services, including ultrasound examinations,
reimbursement currently is based on the lesser of the hospital's costs or
charges, or a blended amount, 42 percent of which is based on the hospital's
reasonable costs and 58 percent of which is based on the fee schedule amount
that Medicare reimburses for such services when furnished in a physician's
office. For the fiscal years 1991 through 1998 (beginning October 1, 1990),
reimbursement for the cost portion of the blend is reduced by 5.8 percent.
Capital acquisition costs for services furnished to hospital outpatients are
currently reimbursed on the basis of 90 percent of the reasonable costs actually
incurred by the hospital.

Until January 1, 1992, Medicare generally reimbursed physicians on the basis of
their reasonable charges or, for certain physicians, including radiologists, on
the basis of a "charge-based" fee schedule.  On January 1, 1992, Medicare began
to phase in over a five-year period a new system that reimburses all physicians
based on the lower of their actual charges or a fee schedule amount based on a
"resource-based relative value scale." 

                                       9
<PAGE>
 
Reimbursement for services rendered to Medicaid beneficiaries is determined
pursuant to each state's Medicaid plan which is established by state law and
regulations, subject to requirements of Federal law and regulations. The Clinton
Administration and Congress currently are considering significant revisions to
the Medicaid program that would allow states more control over coverage and
payment issues. At this time whether such changes will be enacted into law and,
if so, what the impact would be on Medicaid payment for diagnostic services is
uncertain.

As part of the Omnibus Budget Reconciliation Act of 1993, Congress enacted
provisions, effective January 1, 1995, which prohibit physicians from referring
Medicare or Medicaid patients to any entity in which the physician or a family
member has an ownership or compensation relationship if the referral is for any
of a list of "designated health services", which includes ultrasound services.
Regulations implementing these statutory provisions have not been published.
These prohibitions, and similar prohibitions in some state laws, may result in
lower utilization of certain procedures, including ultrasound.

The Clinton Administration and the Congress from time to time consider various
Medicare and other health care reform proposals that could significantly affect
both private and public reimbursement for health care services.  Some of these
proposals, if enacted into law, could reduce reimbursement for or the incentive
to use diagnostic devices and procedures and thus could adversely affect the
demand for diagnostic devices, including the Company's products.

In addition to the Federal laws described above, there are state laws and
regulations regarding the manufacture and sale of health care products and
diagnostic devices, and reimbursement for such products and their use.  These
laws and regulations also are subject to future changes whose impact cannot be
projected.


MANUFACTURING

The Company primarily manufactures its products at its Mountain View, California
facility.  Fabrication of most transducers is performed in-house in order to
safeguard the Company's proprietary technology.  In October 1994, Acuson
acquired Sound Technology Incorporated ("STI"), a transducer manufacturer
located in State College, Pennsylvania.  STI provides complementary technical
capabilities to the Company's established Transducer Division. For other sub-
assemblies, the Company generally subcontracts the assembly or fabrication to
outside vendors and in addition produces some components at its own facility in
Canoga Park, California. Sub-assemblies are produced according to the Company's
designs or specifications. The Company performs assembly, testing and quality
assurance at various stages of completion.

Component parts and microprocessors for the Company's products and some
specialty transducers are purchased from outside vendors.  A number of such
items currently have limited or single sources of supply. See "Investment Risks
- Manufacturing" below.

The Company builds units to a marketing forecast that is updated periodically
and utilizes a commercially available computer system for manufacturing,
accounting, and sales order processing.  Because it builds to forecast, the
Company does not consider its backlog a significant indicator of business
levels.


EMPLOYEES

As of December 31, 1995, the Company had 1,672 full-time employees. The Company
considers its relations with its employees to be good.


INVESTMENT RISKS

In evaluating and understanding Acuson's business and financial prospects and
the potential success of any Acuson product, and in evaluating any forward-
looking statement contained in this document or otherwise, prospective investors
and shareholders should carefully consider the factors set forth below.

                                       10
<PAGE>
 
NEW PRODUCTS.  Acuson believes that a continued flow of new products is of great
importance to its success.  The Company has spent an average of 16.7% of its
revenue on research and development over the last five years, and has a number
of new products under development at any time.  However, the Company cannot
accurately predict when new products will be developed and available for sale.
In addition, the Company may be unable to complete new product development in a
timely manner, and some new product development programs may not be completed at
all.  Further, any new product developed and introduced by the Company may not
be successful in the marketplace.  In addition, the anticipation or introduction
of new products may adversely impact orders for and shipments of existing
products, as customers delay submitting new orders or delay delivery dates of
existing orders while they await or evaluate new products.  Also, when a new
product is introduced, customers may potentially cancel orders in the backlog.
Finally, to the extent that the Company has inventory for products not yet
introduced, the Company may be required to write off the value of that inventory
if the product is in fact not introduced.

COMPETITION.  Diagnostic ultrasound is a well-established field in which there
are a number of competitors.  The Company competes with several companies and
their affiliates such as Advanced Technology Laboratories, Inc. (ATL), Aloka
Co., Ltd., Diasonics, Inc. (a subsidiary of Elbit, Ltd.), General Electric
Company, Hewlett-Packard Company, Hitachi Corporation, Philips Ultrasound,
Inc., Siemens Medical Systems, Inc., and Toshiba Medical Systems, Inc., most of
which have significantly greater financial and other resources.  In addition,
most of these companies compete in more medical imaging and other market
segments and countries than the Company.  The products offered to date by these
competitors in some cases include features and capabilities not currently
offered by the Company and in some cases are substantially less expensive than
the Company's products.

Market success in diagnostic ultrasound is heavily dependent on the purchaser's
evaluation of the system's diagnostic value, ease of use and safety.  Any
established or new ultrasound company may introduce a system or upgrades to an
existing system that is equal to or superior to the Company's products in
quality or performance and no assurance can be given that the Company's products
will remain competitive with existing or future products.  If a competitor
introduces a new product, customers may delay submitting new orders to the
Company and may cancel orders in the backlog.  Further, recently ATL received
premarket approval (PMA) from the United States Food and Drug Administration
(FDA) for a particular claim relating to its system for use in breast imaging.
While the FDA's approval is not an indication that ATL's product is superior for
any application, the granting of the PMA means that only ATL may promote its
product for that application.  The PMA may adversely impact Acuson's sales of
systems for breast imaging.

ULTRASOUND MARKET CHANGES.  Ultrasound is generally among the least expensive of
modalities such as conventional X-ray, computed tomography, magnetic resonance
imaging and diagnostic ultrasound imaging.  In addition, in certain
applications, ultrasound offers capabilities that make it the modality of choice
regardless of cost.  However, these price and/or performance advantages may not
continue in comparison to other current or future imaging modalities.  In
addition, ultrasound systems compete with other imaging modalities for limited
hospital funding.

The trends of health care provider consolidation, medical cost containment, and
intense competitive pressures are continuing in the market.  These factors have
put increased pressures on ultrasound system pricing and have required the
Company to introduce lower priced configurations of its systems.  These factors
have contributed to the decline in the Company's gross margins over the last
several years.  For example, the Company's gross margins have declined from
61.3% in 1990 to 53.5% in 1995.  Further, the US government is considering
Medicare reforms.  The Company believes that future revenues and profitability
will continue to be impacted by these uncertainties, especially in the domestic
markets.  Although some portions of the international ultrasound markets are
experiencing some economic growth, it is uncertain whether this is temporary or
permanent.

PATENTS AND PROPRIETARY TECHNOLOGY.  Acuson attempts to protect technologies
that it views as proprietary through a combination of trade secrets and, where
appropriate, copyrights, trademarks and patents.  The Company owns or has rights
to greater than fifteen U.S. and international patents, covering certain aspects
of its systems, and it has several patent applications pending.  No assurances
can be given as to the breadth or degree of protection patents, copyrights,
trademarks or trade secrets will afford the Company.

The Company's competitors also rely on patents to protect their technology, and
numerous physicians, universities and other individuals or entities in the
ultrasound field are patenting many ultrasound inventions.  The Company has from
time to time received notices from such competitors and other entities or
individuals that the Company may 

                                       11
<PAGE>
 
need a license to one or more of their patents in order to continue to sell its
products. Such a competitor, individual, or entity may have, or may be granted,
a patent to which the Company must obtain a license if it wishes to market and
sell any one or more of its products. To date, patent disputes involving the
Company have ultimately been resolved through licensing arrangements, sometimes
involving the payment of royalties by the Company. There can be no assurance
that the Company will be able to obtain a license to any patent (if so required)
or that such a license will be available on reasonable financial or other terms.

The Company also relies heavily on its unpatented proprietary know-how.  No
assurance can be given that others will not be able to develop substantially
equivalent proprietary information to the Company's, or otherwise obtain access
to the Company's know-how.

REGULATION BY GOVERNMENT AGENCIES.  As a manufacturer of medical devices, Acuson
is subject to various regulations of the United States Food and Drug
Administration (the "FDA") and of the California Department of Health Services,
including marketing clearance or approval of the Company's products by the FDA.
The process of obtaining such clearances or approvals can be time consuming,
lengthy, and expensive and there can be no assurance that the necessary
clearance or approval will be granted the Company or that FDA review will not
involve delays adversely affecting the Company.  In fact, the Company believes
that the time it takes to obtain clearance for new products has increased and
the FDA has recently been more rigorous in its 510(k) clearance process.

Manufacturers of medical devices marketed in the United States are required to
adhere to applicable regulations setting forth detailed Good Manufacturing
Practices ("GMP") requirements, which include testing, control and documentation
requirements.  Manufacturers also must comply with Medical Device Reporting
("MDR") requirements that a firm report to FDA certain adverse events associated
with the Company's devices. The Company is subject to routine inspection by FDA
and certain state agencies for compliance with GMP requirements, MDR
requirements, and other applicable regulations.  The FDA is using its statutory
authority more vigorously during inspections of companies and in other
enforcement matters.  The FDA has proposed changes to the GMP regulations and
has promulgated new MDR regulations, both of which will likely increase the cost
of compliance with GMP requirements.  The Company also is subject to numerous
federal, state and local laws relating to such matters as safe working
conditions, manufacturing practices, environmental protection, fire hazard
control and disposal of hazardous or potentially hazardous substances.  Changes
in existing requirements or adoption of new requirements could have a material
adverse effect on the Company's business, financial condition, and results of
operations.  Although Acuson believes that it is in compliance with all
applicable regulations of the FDA and the State of California, current
regulations depend heavily on administrative interpretation, and there can be no
assurance that the Company will not incur significant costs to comply with laws
and regulations in the future or that laws and regulations will not have a
material adverse effect upon the Company's business, financial condition or
results of operations.  In addition, the potential effects on the Company of
heightened enforcement of federal and state regulations cannot be predicted.

Federal and state regulations also govern or influence the reimbursement to
health care providers of fees and capital equipment costs in connection with
medical examinations of certain patients.  Changes in current policies could
impact reimbursement for the purchase and/or operation of the Company's
equipment by such providers and thereby adversely affect future sales of the
Company's products.  In particular, the Clinton Administration and the Congress
are debating and considering various Medicare and other health care reform
proposals that could significantly affect both private and public reimbursement
for health care services.  Some of these proposals, if enacted into law, could
reduce reimbursement for or the incentive to use diagnostic devices and
procedures and thus could adversely affect the demand for diagnostic devices,
including the Company's products.

In addition to the Federal laws described above, there are state laws and
regulations regarding the manufacture and sale of health care products and
diagnostic devices, and reimbursement for such products and their use.  These
laws and regulations also are subject to future changes whose impact cannot be
projected.

EMPLOYEES.  Acuson believes that its continued success and future growth will
depend on, among other factors, its ability to continue to attract and retain
skilled employees.  The loss of a significant number of employees could
adversely affect its business, most significantly by delaying the development of
new products.  The job market in the Silicon Valley area is very competitive,
especially for skilled electrical and software engineers.  There can be no
assurance that the Company will be able to retain or hire key employees.

                                       12
<PAGE>
 
MANUFACTURING.  Component parts and microprocessors for the Company's products
and some specialty transducers are purchased from outside vendors.  A number of
such items currently have limited or single sources of supply, and disruption or
termination of those sources could have a temporary adverse effect on shipments
and the financial results of the Company.  The Company believes that it could
ultimately develop alternate sources for all such items, but that sales could be
lost or deferred as a result of doing so.

SERVICE.  Approximately 24.6% of the Company's 1995 revenues were derived from
the Company's service activities, including the sales of service contracts and
time and material services.  Increasing cost containment pressures in the market
have adversely impacted the number of customers purchasing service contracts,
but this impact has been offset by the Company's increased installed base and an
increase in time and material services.  The Company believes that the trend
away from service contracts will continue and there can be no assurance that the
Company will be able to continue to maintain its current levels of service
contract revenue.  In addition, the introduction of new products by the Company
could reduce the sale of service contracts and options to the installed base.

INTERNATIONAL OPERATIONS AND INTERNATIONAL RECEIVABLES.  As the Company's
international business has grown, the Company has an increasing percentage of
its receivables in other countries.  In Italy the amount of receivables exceeds
$9,000,000 and in Brazil and China, the amount of receivables exceeds $4,000,000
each.  Political instability or other issues may impact the ability of the
Company to collect receivables in foreign countries.  The Company enters into
foreign currency exchange contracts as described in Note 2 to its Consolidated
Financial Statements for the year ended December 31, 1995 and does not believe
it has significant risk from changes in exchange rates.


Acuson, AEGIS, MultiHertz, Vector, XP and the XP logo are registered trademarks
of Acuson Corporation. 128XP, 128XP/4, 128XP/10, and Dynamic Computed Lens
System are trademarks of Acuson Corporation.

                                       13
<PAGE>
 
ITEM 2
PROPERTIES

The Company leases its facilities under operating leases.  The principal offices
and manufacturing space are located in Mountain View, California. In addition,
the Company leases manufacturing facilities in Canoga Park, California and State
College, Pennsylvania, and sales and service facilities in various locations in
the United States and abroad. The Company believes its facilities are adequate
for its present needs, in good condition and suitable for their intended uses.

ITEM 3
LEGAL PROCEEDINGS

On July 1, 1993 and July 30, 1993, individuals purporting to represent a class
of persons who purchased Acuson common stock during the period between October
24, 1990, and July 22, 1992, filed two separate, but related, actions against
the Company and twelve of its officers and one former officer in the Federal
District Court for the Northern District of California alleging that the
defendants' statements about the Company were incomplete or inaccurate, in
violation of Federal securities laws.  Plaintiffs sought damages in an
unspecified amount, as well as equitable relief or injunctive relief and
attorneys' fees, experts' fees and costs.  In September 1995, the parties agreed
in principal to settle the pending litigation, subject to the Court's approval.
The proposed settlement would not have a material adverse effect on the
Company's financial condition.

On October 27, 1994, the Company was sued in Ghent, Belgium, by Cormedica NV, in
connection with the Company's termination of its distributor relationship with
Cormedica.  In the suit, Cormedica seeks indemnities and damages in the amount
of approximately $2.5 million.  The Company intends to defend this suit
vigorously.  Management believes that the ultimate outcome of this matter will
not have a material adverse effect on the Company's financial condition.

ITEM 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

ITEM 4A

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.  The directors and executive
officers of the Company and their ages as of March 31, 1996 are as follows:

<TABLE>
<CAPTION>
 
NAME                            AGE   POSITION
----                            ---   --------
<S>                             <C>   <C>
Samuel H. Maslak                 47   Chairman of the Board and Chief Executive
                                      Officer
Robert J. Gallagher              52   President, Chief Operating Officer and
                                      Director
Royce Diener                     78   Director
Albert L. Greene                 46   Director
Karl H. Johannsmeier             67   Director
Alan C. Mendelson                48   Director
Daniel R. Dugan                  41   Senior Vice President, Worldwide Sales,
                                      Service and Marketing
Judith A. Heyboer                46   Senior Vice President
Bradford C. Anker                50   Vice President, Manufacturing
Charles H. Dearborn              43   Vice President, Secretary and General
                                      Counsel
Stephen T. Johnson               52   Vice President, Chief Financial Officer
                                      and Treasurer
L. Thomas Morse                  52   Vice President, Corporate Controller
William C. Varley                46   Vice President, Cardiology Business
                                      Operations
</TABLE>

SAMUEL H. MASLAK co-founded the Company in September 1981, was Chief Executive
Officer and a director from that date.  He was President  of the Company from
September 1981 until May 1995.  He was appointed Chairman of the Board in May
1995.

                                       14
<PAGE>
 
ROBERT J. GALLAGHER joined Acuson in January 1983 as Vice President, Finance and
Chief Financial Officer.  Mr. Gallagher became Executive Vice President in March
1991, Chief Operating Officer in January 1994 and was elected a director and
President of the Company in May 1995.

ROYCE DIENER became a director of the Company in October 1985.  From 1975 to
1979, Mr. Diener served as President and Chief Executive Officer of American
Medical International, Inc., a hospital management company ("AMI"). From 1979 to
1985, he was Chairman of the Board and Chief Executive Officer of AMI, and he
continued as Chairman of the Board until 1987 and as a director until November
1989.  He is now Retired Chairman of the Board of AMI.  He is a director of
American Health Properties, Inc. and a member of the Board of Advisors for
Advance Technology Venture Fund II, which is registered as an investment company
under the Investment Company Act of 1940.

ALBERT L. GREENE became a director of the Company in March 1995.  Mr. Greene has
served as the President and Chief Executive Officer of Alta Bates Medical Center
in Berkeley, California since 1990 and is a member of the American College of
Healthcare Executives, the American Hospital Association, the Alta Bates Medical
Center Board of Trustees, the Alta Bates Health System Board of Directors, and
other hospital associations.

KARL H. JOHANNSMEIER served as a director of the Company from September 1981 to
May 1994 and has also served as a director from March 1995 to the present.  He
founded Optimetrix Corporation, a semiconductor processing equipment company,
where he served as President and Chief Executive Officer from 1976 to 1981 and
as Chairman of the Board of Directors from 1976 to 1984.  Optimetrix Corporation
was acquired by Eaton Corporation in 1982. Mr. Johannsmeier has been a private
investor over the last twenty years.

ALAN C. MENDELSON became a director of the Company in March 1995.  Mr. Mendelson
has been a partner in the law firm of Cooley Godward Castro Huddleson Tatum
since January 1980 and served as Managing Partner of its Palo Alto office
between May 1990 and March 1995.  Mr. Mendelson also served as Secretary and
Acting General Counsel of Amgen Inc., a biopharmaceutical company, from April 
1990 through March 1991 and has served as Acting General Counsel of Cadence 
Design Systems, Inc., an electronic design automation software company, since 
November 1995.  Mr. Mendelson is also a director of Isis Pharmaceuticals, Inc., 
a biopharmaceutical company, CoCensys, Inc., a biopharmaceutical company, and 
Elexsys International, Inc., a manufacturer of interconnect products used in 
advanced electronic equipment.

DANIEL R. DUGAN joined the Company in 1984 as Western Regional Sales Manager,
became National Sales Manager in October 1988 and Director, North American Sales
in August 1989. From November 1989 through April 1991, he was Vice President of
Ultrasound Business Operations at Toshiba America Medical Systems, Inc.  In
April 1991, Mr. Dugan rejoined Acuson as Vice President, Field Operations.  He
became Senior Vice President, Worldwide Sales, Service and Marketing in February
1994.

JUDITH A. HEYBOER joined the Company in October 1983 as Director of Employee
Relations and became Vice President, Employee Relations in July 1984.  She
became Senior Vice President in February 1994.

BRADFORD C. ANKER joined the Company in December 1983 and has served as Vice
President, Manufacturing since that date.

CHARLES H. DEARBORN joined the Company in October 1988 and has served as General
Counsel since that date.  He was elected Secretary of the Company in February
1991 and Vice President in February 1995.

STEPHEN T. JOHNSON joined the Company in February 1986 as Treasurer and became
Vice President, Treasurer in March 1989.  In January 1994, he became Chief
Financial Officer.

L. THOMAS MORSE joined the Company in July 1983 and has served as Corporate
Controller since that date.  He was elected an officer of the Company in March
1989 and Vice President, Corporate Controller in February 1991.

WILLIAM C. VARLEY joined Acuson in August 1988 as Cardiology Marketing Manager,
became Director of Marketing in January 1989, Vice President, Marketing in March
1991 and Vice President, Cardiology Business Operations in June 1994.

                                       15
<PAGE>
 
PART II
ITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Acuson's Common Stock, par value $.0001, trades on the New York Stock Exchange
under the symbol ACN. The following table sets forth the high and low closing
sales price on the New York Stock Exchange for 1995 and 1994.

<TABLE>
<CAPTION>


                          1995         HIGH     LOW
                     --------------------------------
                     <S>              <C>      <C>
                     1st Quarter      $16.63   $11.38
                     2nd Quarter       12.38    10.88
                     3rd Quarter       13.88    11.50
                     4th Quarter       13.38    10.75

                     1994              HIGH     LOW
                     --------------------------------
                     1st Quarter      $13.25   $11.38
                     2nd Quarter       15.25    12.13
                     3rd Quarter       16.25    11.63
                     4th Quarter       18.38    14.88

</TABLE>

The approximate number of shareholders of record of the Company's Common Stock
as of December 31, 1995 was 1,699.

Acuson has not paid any cash dividends since its inception and does not
anticipate paying cash dividends in the foreseeable future.


ITEM 6
SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
 
 
Year Ended December 31,
(In thousands, except per share amounts)     1995       1994       1993       1992       1991
-----------------------------------------------------------------------------------------------
<S>                                        <C>        <C>        <C>        <C>        <C>
Consolidated Statements of Operations
 Data:
  Net sales                                $328,922   $350,484   $295,289   $342,832   $336,275
  Net income                                  7,055     18,267      3,711     36,806     58,522
 
Earnings Per Share:
  Net income                                  $0.25      $0.62      $0.13      $1.08      $1.59
  Weighted average common and               
    common equivalent shares                 
    outstanding                              28,237     29,382     28,934     34,283     36,886
 
Consolidated Balance Sheet Data:
   Working capital                         $121,410   $138,336   $113,502   $131,728   $223,557
   Total assets                             295,853    304,638    271,081    278,557    336,141
   Stockholders' equity                     195,997    207,785    183,261    201,146    272,362
 
</TABLE>

                                       16
<PAGE>
 
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS


RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items in the
consolidated statements of operations as percentages of total net sales and the
percentage change of each such item from the comparable prior period.

<TABLE>
<CAPTION>
                                                                         Percentage Change
                                                                          1995       1994
                                            Percentage of Net Sales       vs.        vs.
Year Ended December 31,                     1995      1994      1993      1994       1993
------------------------------------------------------------------------------------------
<S>                                        <C>       <C>       <C>      <C>        <C>
Net sales
 Product                                     75.4%     78.7%    77.5%     (10.1)%     20.6%
 Service                                     24.6      21.3     22.5        8.5       12.3
                                            -----     -----    -----
     Total net sales                        100.0     100.0    100.0       (6.2)      18.7
                                            -----     -----    -----
Cost of sales
 Product                                     35.6      33.2     30.3        0.7       30.0
 Service                                     10.9      10.2     11.6        0.1        5.1
                                            -----     -----    -----
     Total cost of sales                     46.5      43.4     41.9        0.6       23.1
                                            -----     -----    -----
Gross profit                                 53.5      56.6     58.1      (11.3)      15.5

Operating expenses
 Selling, general and administrative         31.7      30.1     34.6       (1.1)       2.9
 Product development                         20.2      20.2     19.8       (6.2)      21.3
 Restructuring cost                             -         -      4.1          -     (100.0)
                                            -----     -----    -----
     Total operating expenses                51.9      50.3     58.5       (3.1)       2.0
                                            -----     -----    -----
     Income (loss) from operations            1.6       6.3     (0.4)     (76.6)       n/m

Interest income, net                          1.2       1.0      1.6       11.1      (23.6)
                                            -----     -----    -----
     Income before income taxes               2.8       7.3      1.2      (64.5)     645.5
 
Provision for (benefit from) income       
 taxes                                        0.6       2.1     (0.1)     (72.2)       n/m 
                                            -----     -----    -----                    
     Net income                               2.2%      5.2%     1.3%    (61.4)%     392.2%
                                            =====     =====    =====
 
</TABLE>

1995 COMPARED TO 1994

NET SALES in 1995 decreased by 6.2% to $328.9 million from $350.5 million in
1994.  Worldwide product revenues in 1995 decreased by $27.9 million from $275.8
million in 1994, a 10.1% decrease.  In 1995 the Company experienced decreases in
both unit volume and lower average unit selling prices. An increase in unit
volume 

                                       17
<PAGE>
 
realized in the international market was more than offset by a decrease in the
domestic market. The Company's average unit selling price was lower in 1995 as a
result of increased sales in the international market, where the Company sold
lower priced product configurations and made greater use of international
distributors, continued domestic health care provider consolidations, medical
cost containment and intense competitive pressures. International revenues
increased 9.4% in 1995 to $121.6 million, totalling 37% of the Company's sales
as compared to 31.7% in 1994. Total domestic revenues decreased 13.4% to $207.3
million.

The trends of domestic health care provider consolidation, medical cost
containment, and intense competition, which impacted the ultrasound market in
1995, are expected to continue into 1996.

Cost of Sales increased as a percentage of net sales to 46.5% for 1995 compared
to 43.4% for 1994.  The percentage increase in 1995 was primarily a reflection
of reduced product prices, increased sales of lower priced product
configurations and slightly higher product costs, partially offset by lower
service costs as a percentage of sales.

Selling, general and administrative costs were $104.4 million for 1995 compared
to $105.5 million for 1994.  As a percentage of net sales, these expenses
increased to 31.7% in 1995 from 30.1% in 1994.  Costs did not decline at the
same rate as sales primarily because planned growth in international
distribution expense was only partially offset by decreased legal and domestic
selling expenses.

Product development spending for 1995 declined to $66.4 million from $70.8
million for 1994.  As a percentage of net sales, product development was 20.2%
in both 1995 and 1994.  The $4.4 million decline in 1995 spending represented a
planned reduction in the level of product development.

Provision for income taxes was $2.0 million in 1995 versus $7.3 million in 1994.
The Company's overall tax rate decreased to 22.4% in 1995 from 28.5% in 1994.
The decline in the rate was due to continuing tax credits coupled with lower
pre-tax profits.

Net income was $7.1 million in 1995 compared to $18.3 million in 1994.  The
decrease was principally the result of a lower volume of sales partially offset
by reduced operating expenses.


1994 COMPARED TO 1993

Net sales in 1994 increased by 18.7% to $350.5 million from $295.3 million in
1993. Worldwide product revenues in 1994 increased by $47.0 million from $228.7
million in 1993, a 20.6% increase.  Although product unit sales increased, the
Company's average unit selling prices were lower in 1994 as a result of an
increase in sales of lower priced product configurations and intense competitive
pressures.  Worldwide service revenues increased by 12.3% to $74.7 million from
$66.6 million in 1993, primarily due to growing service contract revenue from a
larger base of installed systems.  Geographically, international revenues
increased 41.5% in 1994 to $111.1 million, totalling 31.7% of the Company's
sales as compared to 26.6% in 1993.  Total domestic revenues increased 10.4% to
$239.3 million.

Uncertainty in the changing U.S. health care environment continued to affect the
ultrasound markets in 1994.  Although the prospect of legalized health care
reform receded at year end, the trends of health care provider consolidation,
medical cost containment and intense competition existed throughout the year.

Cost of sales increased as a percentage of net sales to 43.4% for 1994 compared
to 41.9% for 1993.  The percentage increase in 1994 was primarily a reflection
of reduced product prices and increased sales of lower priced product
configurations, partially offset by lower service costs as a percentage of
sales.

Selling, general and administrative costs were $105.5 million for 1994 compared
to $102.6 million for 1993.  As a percentage of net sales, these expenses
decreased to 30.1% in 1994 from 34.6% in 1993.  Costs did not increase at the
same rate as sales primarily because of a reduction in legal expenses, reduced
advertising spending, and flat domestic sales expense, offset by increased
international expenses for additional staff in selected subsidiaries.

                                       18
<PAGE>
 
Product development spending for 1994 totalled $70.8 million compared to $58.3
million for 1993.  As a percentage of net sales, product development was 20.2%
in 1994 and 19.8% in 1993.  The increase in product development expenditure
resulted from the decision to continue to invest in multiple new product
programs.

Restructuring cost was a one-time pre-tax charge of $12.0 million taken during
the second quarter of 1993.  The cost was 4.1% of  net sales.  The restructuring
consisted of a series of planned actions, including a reduction of about 15% of
the Company's worldwide work force, the restructuring of facilities and the
write-down of certain assets.  Substantially all of the $1.1 million
restructuring balance that remained at December 31, 1993 was used during 1994.
The actual costs of the restructuring were substantially in alignment with
original expectations.

Provision for income taxes was $7.3 million in 1994 versus a benefit of $0.3
million in 1993; the prior year's benefit was due primarily to a research and
development tax credit and to the mix of income between domestic and
international operations.  The Company's overall tax rate increased to 28.5% in
1994 from (8.2)% in 1993.

Net income was $18.3 million in 1994 compared to $3.7 million in 1993.  The
increase was the result of a higher volume of sales and the absence of the
restructuring cost in 1994.

Investments In May 1993, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", which was effective for fiscal years
beginning after December 15, 1993.  This statement addresses the accounting for,
and reporting of, investments in certain equity securities that have readily
determinable fair values and all debt securities.  The Company adopted this
statement at January 1, 1994.  The effect of implementing this statement was not
material to the Company's financial statements.


INFLATION

To date, the Company has not experienced any significant effects from inflation.


LIQUIDITY AND CAPITAL RESOURCES

In October 1993, the Board of Directors authorized the repurchase of 4,000,000
shares of the Company's common stock over an unspecified period of time. During
1995, the Company repurchased 2,347,100 shares at a total cost of $28.0 million.
As of December 31, 1995, the Company had repurchased 2,714,800 shares towards
the 4,000,000 shares authorized at a cumulative cost of $33.4 million.  As with
all purchases thus far, the Company intends to fund future purchases by
utilizing the Company's cash balances.

The Company's cash and short-term investments balance decreased $11.0 million in
1995 while this balance had increased $7.8 million in 1994.  The Company
generated $26.4 million in cash from operations, as compared to 1994 when
operations generated $33.0 million in cash. In 1994 the sale of the Company's
lease portfolio generated $21.6 million in cash.  The Company's investment
activities in property and equipment and in other assets used $17.7 million in
1995 versus $27.4 million in 1994.  The cash impact of the Company's common
stock repurchase program was $27.3 million in 1995 up from $7.2 million in the
prior year.  Employee participation in the Company's stock option and stock
purchase plans raised $7.0 million in cash in 1995 compared to $9.5 million in
1994.

Net accounts receivable decreased $0.5 million in 1995, to $78.0 million at
December 31, 1995, which coincided with a reduction in revenues.  Based on
average sales during the fourth quarters of 1995 and 1994, days sales
outstanding were 84 days and 85 days, respectively.  The investment in leases
increased by $5.5 million as a result of the continued additions of new leases
throughout the year.

Net property and equipment increased by $1.2 million, to $50.2 million, while
gross property and equipment balances grew by $15.7 million.  The increase was
due primarily to increased investment of $8.5 million spent for computers and
software and $3.5 million spent to acquire manufacturing and test equipment.
The Company 

                                       19
<PAGE>
 
continued to upgrade and increase the number of engineering workstations and
test equipment for product development.

At December 31, 1995, the Company's working capital totalled $121.4 million,
including $56.1 million in cash and short-term investments.  The Company also
has a revolving unsecured credit facility of $50.0 million which is in effect
through March 1997.  No compensating balances are required and the full amount
is available under this credit facility.

Based on its current operating plan, the Company believes that the liquidity
provided by its existing cash and short-term investment balances, the borrowing
arrangements described above, and cash generated from operations will be
sufficient to meet the Company's operating and capital requirements for fiscal
1996.

                                       20
<PAGE>
 
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
 
 
Year Ended December  31,
(In thousands, except per share amounts)     1995       1994       1993
-------------------------------------------------------------------------
<S>                                        <C>        <C>        <C>
NET SALES
    Product                                $247,863   $275,754   $228,721
    Service                                  81,059     74,730     66,568
                                           --------   --------   --------
 
       Total net sales                      328,922    350,484    295,289
                                           --------   --------   --------
 
COST OF SALES
    Product                                 117,043    116,233     89,399
    Service                                  35,961     35,931     34,203
                                           --------   --------   --------
 
       Total cost of sales                  153,004    152,164    123,602
                                           --------   --------   --------
 
       Gross profit                         175,918    198,320    171,687
                                           --------   --------   --------
 
 
OPERATING EXPENSES
    Selling, general and administrative     104,426    105,536    102,587
    Product development                      66,367     70,786     58,336
    Restructuring                                --         --     12,000
                                           --------   --------   --------
 
       Total operating expenses             170,793    176,322    172,923
                                           --------   --------   --------
 
 
       Income (loss) from operations          5,125     21,998     (1,236)
 
Interest income, net                          3,961      3,566      4,665
                                           --------   --------   --------
 
       Income before income taxes             9,086     25,564      3,429
 
Provision for (benefit from) income           2,031      7,297       (282)
 taxes                                     --------   --------   --------
 
       NET INCOME                          $  7,055   $ 18,267   $  3,711
                                           ========   ========   ========
 
EARNINGS PER SHARE                            $0.25      $0.62      $0.13
                                           ========   ========   ========
 
Weighted average common and common
    equivalent shares outstanding            28,237     29,382     28,934
                                           --------   --------   --------
 
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       21
<PAGE>
 
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
 
December 31,
(In thousands, except per share amounts)                                                  1995                         1994
------------------------------------------------------------------------------------------------------------------------------ 
<S>                                                                                     <C>                
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                            $  46,135                    $  28,671
   Short-term investments                                                                  10,000                       38,421
                                                                                        ---------                    ---------
       Total cash and short-term investments                                               56,135                       67,092
   Accounts receivable, net of allowance for doubtful accounts
     of $2,998 in 1995 and $3,432 in 1994                                                  77,992                       78,534
   Inventories                                                                             50,484                       49,926
   Deferred income taxes                                                                   24,188                       26,127
   Other current assets                                                                    12,467                       13,510
                                                                                        ---------                    ---------
       Total current assets                                                               221,266                      235,189
                                                                                        ---------                    ---------
 
PROPERTY AND EQUIPMENT, AT COST
   Furniture and fixtures                                                                  14,855                       14,086
   Test equipment                                                                          29,010                       26,797
   Machinery and equipment                                                                 89,871                       78,017
   Leasehold improvements                                                                  23,155                       22,314
                                                                                        ---------                    ---------
                                                                                          156,891                      141,214
     Less: Accumulated depreciation and amortization                                     (106,647)                     (92,217)
                                                                                        ---------                    ---------
       Total property and equipment, net                                                   50,244                       48,997
                                                                                        ---------                    ---------
 
OTHER ASSETS
   Net investment in leases, net of current portion                                        14,926                       10,618
   Other long-term assets, net                                                              9,417                        9,834
                                                                                        ---------                    ---------
 
       Total assets                                                                     $ 295,853                    $ 304,638
                                                                                        =========                   ==========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                                                      $  16,295                    $ 16,295
  Accrued compensation                                                                     23,800                      22,743
  Deferred revenue                                                                         24,529                      20,871
  Accrued warranty                                                                          4,440                       4,475
  Accrued income taxes                                                                      9,162                      10,355
  Customer deposits                                                                         6,598                       6,774
  Other accrued liabilities                                                                15,032                      15,340
                                                                                        ---------                    --------
       Total current liabilities                                                           99,856                      96,853
                                                                                        ---------                    --------
 
COMMITMENTS AND CONTINGENCIES (NOTE 6)
STOCKHOLDERS' EQUITY
  Preferred stock, par value $.0001: authorized, 10,000 shares;
    outstanding, none                                                                          --                          --
  Common stock and additional paid-in capital, common stock par value
    $.0001: authorized, 50,000 shares; outstanding, 27,275 shares in 1995
    and 28,904 shares in 1994                                                              79,702                      79,183
  Cumulative translation adjustment                                                           206                      (1,240)
  Unrealized holding gain (loss) on investment securities                                      37                        (370)
  Retained earnings                                                                       116,052                     130,212
                                                                                        ---------                   ---------
       Total stockholders' equity                                                         195,997                     207,785
                                                                                        ---------                   ---------
 
       Total liabilities and stockholders' equity                                       $ 295,853                   $ 304,638
                                                                                        =========                   =========
</TABLE> 

The accompanying notes are an integral part of these financial statements.

                                       22
<PAGE>
 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE> 
<CAPTION> 
                                                                          Cumulative     Unrealized                    Total
                                                   Common Stock           Translation     Holding      Retained    Stockholders'
For the Three Years Ended December 31, 1995    Shares         Amount      Adjustment       Loss        Earnings       Equity
(In thousands, except per share amounts)
-------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>           <C>           <C>           <C>             <C>  
BALANCE, DECEMBER 31, 1992                       29,818        $68,816       $(1,481)   $      --         $133,811    $201,146
 
Exercise of stock options at $0.13 to
    $14.67 per share                                108            394            --           --               --         394
Repurchase of common stock at $11.13 to
    $14.00 per share                             (2,043)        (4,849)           --           --          (21,117)    (25,966)
Issuance of stock under employee
    stock purchase plan at $9.89 to
    $10.95 per share                                396          4,053            --           --               --       4,053
Tax benefit of employee stock                        
 transactions                                        --            213            --           --               --         213
Translation adjustments                              --             --          (778)          --               --        (778)
Stock option compensation                            --            488            --           --               --         488
Net income                                           --             --            --           --            3,711       3,711
                                                 ------        -------    ----------    ---------    -------------    --------
BALANCE, DECEMBER 31, 1993                       28,279         69,115        (2,259)          --          116,405     183,261
 
Effect of adoption of accounting   
 principle                                           --             --            --          (19)              --         (19)
Exercise of stock options at $0.13 to
    $17.17 per share                                592          5,454            --           --               --       5,454
Repurchase of common stock at $13.13 to
    $16.13 per share                               (368)          (938)           --           --           (4,460)     (5,398)
Issuance of stock under employee
    stock purchase plan at $9.89 to
    $10.20 per share                                401          4,023            --           --               --       4,023
Tax benefit of employee stock          
 transactions                                        --          1,529            --           --               --       1,529
Translation adjustments                              --             --         1,019           --               --       1,019
Unrealized holding loss on investment
    securities                                       --             --            --         (351)              --        (351)
Net income                                           --             --            --           --           18,267      18,267
                                                 ------        -------    ----------    ---------    -------------    --------
BALANCE, DECEMBER 31, 1994                       28,904         79,183        (1,240)        (370)         130,212     207,785
 
Exercise of stock options at $0.40 to
    $13.92 per share                                263          2,186            --           --               --       2,186
Repurchase of common stock at $10.75 to
    $13.88 per share                             (2,347)        (6,785)           --           --          (21,215)    (28,000)
Issuance of stock under employee
    stock purchase plan at $10.52 per
     share                                          455          4,791            --           --               --       4,791
Tax benefit of employee stock
 transactions                                        --            327            --           --               --         327
Translation adjustments                              --             --         1,446           --               --       1,446
Unrealized holding gain on investment
    securities                                       --             --            --          407               --         407
Net income                                           --             --            --           --            7,055       7,055
                                                 ------        -------    ----------    ---------    -------------    --------
BALANCE, DECEMBER 31, 1995                       27,275        $79,702       $   206    $      37         $116,052    $195,997
                                                 ======        =======    ==========    =========    =============    ========
</TABLE> 
 
The accompanying notes are an integral part of these financial statements.

                                       23
<PAGE>
 
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
 
 
Year Ended December 31,
(In thousands)                               1995        1994        1993
---------------------------------------------------------------------------
<S>                                        <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
 
     Net income                            $  7,055    $ 18,267    $  3,711
     Adjustments to reconcile net
      income to net cash provided by
       operating activities:
         Depreciation and amortization       17,315      19,665      21,026
         Provision for losses on 
          accounts receivables                 (175)        597         701
         Write-down of assets related
          to the restructuring                   --          --       2,195
         Stock option compensation          
          related to the restructuring           --          --         488
         Tax benefit of employee stock  
          transactions                          327       1,529         213
         Changes in:
           Accounts receivable                1,510     (15,991)      9,875
           Leases receivable                 (5,503)     12,607      (6,048)
           Inventories                         (331)     (7,598)       (715)
           Deferred income taxes              2,137      (5,370)     (5,853)
           Other current assets               2,507        (442)     (3,261)
           Accounts payable                    (106)      3,580      (1,130)
           Accrued compensation                 943       4,277         951
           Deferred revenue                   3,605       1,664       3,052
           Accrued warranty                     (35)      1,188        (744)
           Accrued income taxes              (1,245)      2,354        (762)
           Customer deposits                   (292)       (896)      3,173
           Other accrued liabilities         (1,354)     (2,442)      4,840
                                           --------    --------    --------
 
            Net cash provided by operating 
             activities                      26,358      32,989      31,712
                                           --------    --------    --------
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
     Decrease (increase) in short-term      
      investments                            28,634       9,139      (4,140)
     Investment in property and         
      equipment                             (18,154)    (23,708)    (14,961)
     Decrease (increase) in other assets        500      (3,778)     (2,783)
                                           --------    --------    --------
 
            Net cash provided by (used in)   
             investing activities            10,980     (18,347)    (21,884)
                                           --------    --------    --------
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
     Repurchase of common stock             (27,259)     (7,172)    (24,192)
     Issuance of common stock under
      stock option and stock purchase 
      plans                                   6,977       9,477       4,447
                                           --------    --------    --------
 
            Net cash provided by (used in) 
             financing activities           (20,282)      2,305     (19,745)
                                           --------    --------    --------
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH     
 AND CASH EQUIVALENTS                           408         540        (382)
                                           --------    --------    --------
 
            Net increase (decrease) in     
             cash and cash equivalents       17,464      17,487     (10,299)
 
CASH AND CASH EQUIVALENTS, BEGINNING OF  
 YEAR                                        28,671      11,184      21,483
                                           --------    --------    --------
 
CASH AND CASH EQUIVALENTS, END OF YEAR     $ 46,135    $ 28,671    $ 11,184
                                           ========    ========    ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       24
<PAGE>
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  NATURE OF OPERATIONS

Founded in 1981, Acuson Corporation (the "Company") is a United States-based
multinational corporation. The Company is a leading manufacturer, worldwide
marketer and service provider of medical diagnostic ultrasound systems and image
management products.  The markets for Acuson products are North America, Europe,
Australia, Asia, South America and the Middle East.  The Company's products are
sold primarily to hospitals, private and governmental institutions, health care
agencies, medical equipment distributors and doctors' offices.

NOTE 2.     SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation.  The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries.  All significant
intercompany accounts and transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements.  The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period.  Actual results could differ
from those estimates.

Translation of Foreign Currencies.  The functional currency of Acuson's foreign
subsidiaries is the local currency.  Acuson translates all assets and
liabilities to U.S. dollars at current exchange rates as of the applicable
balance sheet date.  Sales and expenses are translated at the average exchange
rates prevailing during the period.  Gains and losses resulting from the
translation of the foreign subsidiaries' financial statements are reported as a
separate component of stockholders' equity.  The results of foreign exchange
transactions were immaterial to the Company's financial statements.

Concentration of Credit Risk.  The Company provides credit in the form of trade
accounts receivable to hospitals, private and governmental institutions, health
care agencies, medical equipment distributors and doctors' offices. Acuson
products are primarily manufactured at the world headquarters in Mountain View,
California, and are sold through a direct sales force in North America, Europe,
Australia and Japan, and through distributors in Europe, Asia, South America and
the Middle East.  The Company does not generally require collateral to support
customer receivables.  The Company performs ongoing credit evaluations of its
customers and maintains allowances which management believes are adequate for
potential credit losses.

Financial Instruments and Credit Risk.  The Company operates internationally,
giving rise to significant exposure to market risks from changes in foreign
exchange rates.  The Company enters into foreign currency exchange contracts,
which are derivative financial instruments, to reduce exposure to currency
exchange risk.  The effect of this practice is to minimize the impact of foreign
exchange rate movements on the Company's operating results.  Hedging activities
do not subject the Company to exchange rate risk as gains and losses on these
contracts offset gains and losses on the assets, liabilities and transactions
being hedged.  The Company does not engage in foreign currency speculation nor
does it hold or issue financial instruments for trading purposes. Forward
contract terms are currently not more than three months.  The counterparties to
foreign currency exchange contracts are major domestic and international
financial institutions.

At December 31, 1995, the Company had forward exchange contracts maturing from
January 1996 through February 1996 to sell a net equivalent of approximately $22
million of  foreign currencies, of which approximately $6 million are in French
francs, $5 million are in Italian lira, and $5 million are in Japanese yen. The
carrying value of these contracts approximates their fair market value as of
year-end.

Derivatives.  The Company's only use of derivative securities is its routine
usage of forward contracts to hedge foreign currency exposure.

                                       25
<PAGE>
 
Inventories. Inventories are stated at the lower of cost (first-in, first-out)
or market and include material, labor and manufacturing overhead. The components
of inventories were as follows as of December 31:

<TABLE>
<CAPTION>
(In thousands)           1995          1994    
----------------------------------------------
<S>                     <C>           <C>     
Raw materials            $26,906      $29,552
Work-in-process            5,981        3,783
Finished goods            17,597       16,591
                         -------      -------
   Total inventories     $50,484      $49,926
                         -------      -------
</TABLE> 
 
Property and Equipment.  Property and equipment are stated at cost and are
depreciated or amortized using the straight-line method over the following
estimated useful lives:

<TABLE> 
<S>                                   <C>  
Furniture and fixtures                5 years
Test equipment                      3-5 years
Machinery and equipment             3-5 years
Leasehold improvements          Term of lease
</TABLE> 

Revenue Recognition.  Revenues from equipment sales and sales-type leases are
generally recognized when the equipment has been shipped and lease contracts, if
applicable, have been executed.  Estimated costs of installation, which are
minimal, are accrued at the time revenue is recognized.  Service revenues are
recognized ratably over the contractual period or as the services are provided.

Earnings Per Share. Earnings per share is computed based on the weighted average
number of common and common equivalent shares outstanding during the period. The
modified treasury stock method was used in computing the earnings per share as
the number of shares of common stock obtainable upon exercise of outstanding
options in the aggregate exceeded 20% of the number of common shares outstanding
at the end of the year. Primary earnings per share is essentially the same as
fully diluted earnings per share.

Consolidated Statement of Cash Flows.  For purposes of the statement of cash
flows, the Company has classified certain short-term investments as cash
equivalents if the original maturity of such investments is three months or
less.  For purposes of the statements of cash flows, the Company classifies cash
flows from hedging contracts in the same category as the cash flows from the
items being hedged.

Cash paid for income taxes and interest expense was as follows for each of the
years ended December 31:

<TABLE>
<CAPTION>
 
(In thousands)         1995     1994     1993
----------------------------------------------
<S>                   <C>      <C>      <C>
Income taxes          $1,193   $8,248   $9,517
Interest expense      $   58   $  151   $   56
</TABLE>

In conjunction with the repurchase of common stock in 1995 and 1993 (see Note
7), the Company incurred a liability due to the timing of the settlement dates.

<TABLE>
<CAPTION>
 
(In thousands)                              1995        1994       1993
--------------------------------------------------------------------------
<S>                                        <C>         <C>        <C>
Repurchase of common stock                 $ 28,000    $ 5,398    $ 25,966
Cash paid for repurchase of common stock    (27,259)    (7,172)    (24,192)
                                           --------    -------    --------
 
 Net cash effect                           $    741    $(1,774)   $  1,774
                                           --------    -------    --------
 
</TABLE>

Reclassifications.  Certain information reported in previous years has been
reclassified to conform to the 1995 presentation.

                                       26
<PAGE>
 
NOTE 3.     INVESTMENTS

Under Statement of Financial Accounting Standards No. 115, the Company's
investments, which consisted entirely of debt securities, (the "securities"),
were classified as available-for-sale.  These securities mature at various dates
through the year 1997.

As of December 31, 1995, the securities' gross unrealized holding gain was
approximately $57,000.  The unrealized holding gain of approximately $37,000,
net of the tax effect, was reported as a separate component of stockholders'
equity. During the year, the Company sold certain of its available-for-sale
securities for proceeds of approximately $2.7 million.  The Company sold these
securities for approximately original cost.

Short-term investments as of December 31, 1995, consist of the following:

<TABLE>
<CAPTION>
                                             Cost           Market Value      Amount at
Marketable Securities                       of Each          at Balance     Which Carried
(In thousands)                               Issue           Sheet Date    in Balance Sheet
-------------------------------------------------------------------------------------------
<S>                                          <C>             <C>           <C>
 
Municipal securities                         $7,990           $ 8,002          $ 8,002
U.S. Government and agencies                  1,953             1,998            1,998
                                             ------           -------          -------
 
    Total short-term investments             $9,943           $10,000          $10,000
                                             ------           -------          -------
</TABLE> 

NOTE 4.  BANK LINE OF CREDIT

As of December 31, 1995, the Company had an unsecured revolving credit agreement
for $50 million through March 1997.  No compensating balances are required and
the full amount is available under this credit facility.  No draws on this line
of credit were made during the year.

NOTE 5.     NET INVESTMENT IN SALES-TYPE LEASES

The Company leases equipment to customers under sales-type leases as defined in
Statement of Financial Accounting Standards No. 13.  The Company's leasing
operations consist of leases of medical equipment which expire over a period of
1 to 6 years.  The following lists the components of the net investment in
sales-type leases as of December 31, 1995:

<TABLE>
<CAPTION>
(In thousands)                              Amount
--------------------------------------------------
<S>                                        <C>
Minimum amounts receivable                 $22,837
Less: Allowance for uncollectibles            (396)
                                           -------
   Net minimum lease payments receivable    22,441
Estimated residual values of leased             
 property                                       22 
Less: Unearned interest income              (2,686)
                                           -------
 
   Net investment in leases                 19,777
Less: Current portion (included in        
  other current assets)                     (4,851)
                                           -------
   Long-term portion                       $14,926
                                           -------
</TABLE>

                                       27
<PAGE>
 
Minimum amounts receivable under existing leases as of December 31, 1995, were
as follows:

<TABLE>
<CAPTION>
(In thousands)                           Amount
------------------------------------------------
<S>                                      <C>
1996                                     $ 6,459
1997                                       6,405
1998                                       4,934
1999                                       3,582
2000                                       1,421
Thereafter                                    36
                                         -------
 
  Total minimum amounts receivable       $22,837
---------------------------------------  -------
</TABLE>

The Company sold a portion of its lease portfolio, with recourse, for $3.0
million in 1995 and for $21.6 million in 1994.  The maximum recourse liability
to the Company for both transactions, is approximately $2.1 million.

NOTE 6.     COMMITMENTS AND CONTINGENCIES

The Company leases its facilities and certain other equipment under operating
lease agreements expiring through May 31, 2002.  Future minimum lease payments
as of December 31, 1995, were as follows:

<TABLE>
<CAPTION>
 
(In thousands)                            Amount
------------------------------------------------
<S>                                      <C>
1996                                     $10,380
1997                                      10,389
1998                                       9,996
1999                                       9,254
2000                                       7,067
Thereafter                                 7,501
                                         -------
 
  Total future minimum lease payments    $54,587
                                         -------
</TABLE>

Rent expense was approximately $10,689,000, $10,098,000 and $9,414,000 in 1995,
1994 and 1993, respectively.

LEGAL CONTINGENCIES. On July 1, 1993 and July 30, 1993, individuals purporting
to represent a class of persons who purchased Acuson common stock during the
period between October 24, 1990, and July 22, 1992, filed two separate, but
related, actions against the Company and twelve of its officers and one former
officer in the Federal District Court for the Northern District of California
alleging that the defendants' statements about the Company were incomplete or
inaccurate, in violation of Federal securities laws.  Plaintiffs sought damages
in an unspecified amount, as well as equitable relief or injunctive relief and
attorneys' fees, experts' fees and costs.  In September 1995, the parties agreed
in principal to settle the pending litigation, subject to the Court's approval.
The proposed settlement would not have a material adverse effect on the
Company's financial condition.

On October 27, 1994, the Company was sued in Ghent, Belgium, by Cormedica NV, in
connection with the Company's termination of its distributor relationship with
Cormedica.  In the suit, Cormedica seeks indemnities and damages in the amount
of approximately $2.5 million.  The Company intends to defend this suit
vigorously.  Management believes that the ultimate outcome of this matter will
not have a material adverse effect on the Company's financial condition.

                                       28
<PAGE>
 
NOTE 7.  COMMON STOCK

Common Stock Purchase Rights During 1988, the Company declared a dividend of one
common share purchase right for each then outstanding share of common stock.  As
a result of the Company's 3-for-2 split of its common stock in August 1990, each
share of common stock now has associated with it two-thirds of one common share
purchase right.  In addition, two-thirds of one right will be issued with each
future share of common stock issued by the Company before the date the rights
become exercisable, or before the rights are redeemed by the Company, or before
the rights expire on May 15, 1998.  The rights will not be exercisable or
transferable apart from the common stock, until 10 days after another person or
group of persons acquires 20% of the common stock or commences a tender or
exchange offer for at least 20% of the common stock.  Each right entitles the
holder to purchase from the Company one and one-half shares of common stock at
$80 per share, subject to adjustments for dilutive events.  In certain
circumstances, the right will entitle its holder to purchase a larger number of
shares of common stock or stock in an acquiring company.  The Board of Directors
may redeem the rights, at any time, at $.01 per right, payable in cash, common
shares or other consideration.  In addition, the Board may also, without consent
of the holders of the rights, amend the terms of the rights to lower the
threshold for exercisability of the rights.

Stock Option Plans In May 1995, the stockholders approved the Company's 1995
Stock Incentive Plan (the "1995 Plan") which authorizes the issuance of up to
3,500,000 shares of common stock in the form of options, restricted stock grants
or bonuses, and stock appreciation rights.  In addition, the Company has in
effect a 1986 Supplemental Stock Option Plan (the "1986 Plan") and a 1991 Stock
Incentive Plan (the "1991 Plan"). The 1986 Plan expires in May 1996.  Under the
1995 Plan and the 1991 Plan, incentive and supplemental stock options may be
granted to employees, directors and consultants to purchase common stock at a
price which is not less than 100% of the market value (or 10% for supplemental
stock options) of the shares at the grant date.  The options can be granted for
periods of up to ten years and are subject to exercise and vesting schedules as
determined by the Board of Directors.  Options covering 4,223,202 shares were
available for future grant at December 31, 1995.

On June 4, 1993, the Board of Directors offered employees holding non-qualified
stock options the opportunity of cancelling options in exchange for new options
issued at the then current fair market value at the ratio of two new shares for
three cancelled shares.  Options covering approximately 4,672,000 shares at
prices per share ranging from $10.75 to $38.63 were cancelled and options
covering approximately 3,116,000 shares were granted at $10.75 per share.

On August 2, 1994, the Board of Directors approved an amendment to outstanding
non-qualified stock options that provides in general for accelerated vesting of
such options in the event that some person or entity acquires more than 20% of
the Company's then outstanding stock without the approval of the Board of
Directors.

The following table summarizes option activity for the past three years.

<TABLE>
<CAPTION>
 
          (In thousands,
      except per share data)          Shares    Price per Share
----------------------------------------------------------------
<S>                                   <C>       <C>
OUTSTANDING AT DECEMBER 31, 1992       7,266     $ 0.13 - $38.63
      Granted                          4,499     $10.75 - $14.88
      Exercised                         (108)    $ 0.13 - $14.67
      Expired or cancelled            (4,968)    $ 0.40 - $38.63
                                      ------
 
OUTSTANDING AT DECEMBER 31, 1993       6,689     $ 0.13 - $37.38
      Granted                            859     $ 1.80 - $17.75
      Exercised                         (592)    $ 0.13 - $17.17
      Expired or cancelled              (299)    $ 0.13 - $37.38
                                      ------
 
OUTSTANDING AT DECEMBER 31, 1994       6,657     $ 0.40 - $37.38
      Granted                          1,395     $11.00 - $15.75
      Exercised                         (263)    $ 0.40 - $13.92
      Expired or cancelled              (718)    $ 0.40 - $36.38
                                      ------
 
OUTSTANDING AT DECEMBER 31, 1995       7,071     $ 0.60 - $37.38
                                      ------
</TABLE>

                                       29
<PAGE>
 
At December 31, 1995 there were options for 4,278,196 shares exercisable under
these Plans at $0.60 to $37.38 per share.

Employee Stock Purchase Plan  During 1993, the Board of Directors amended the
Company's 1986 Employee Stock Purchase Plan (the "1986 Purchase Plan") to
increase the number of shares which may be issued by 1,250,000 to a total of
2,450,000 shares.  Offerings under the 1986 Purchase Plan ended in August 1995.
In May 1995, the stockholders approved the Company's 1995 Employee Stock
Purchase Plan (the "1995 Purchase Plan") which authorizes the issuance of up to
2,000,000 shares of common stock, subject to adjustment upon changes in
capitalization of the Company.  Offerings under the 1995 Purchase Plan commenced
in September 1995, and as of December 31, 1995, the Company had reserved
2,000,000 shares of common stock for issuance under the 1995 Purchase Plan.
Pursuant to the 1986 Purchase Plan, qualified employees elected to have between
3% and 15% of their salary withheld.  The salary so withheld was then used to
purchase shares of the Company's common stock at a price not less than 85% of
the market value of the stock on the specified dates determined at the
commencement of the offering period.  The withholding requirements and
determination of the stock purchase price under the 1995 Purchase Plan are the
same as in the 1986 Purchase Plan.

Common Stock Repurchase Program In 1992, the Board of Directors authorized the
repurchase of 8,000,000 shares of the Company's common stock.  This program was
completed in 1993.  On October 26, 1993, the Board of Directors authorized the
repurchase of an additional 4,000,000 shares over an unspecified period of time.
As of December 31, 1995, the Company had repurchased 2,714,800 shares for an
aggregate price of $33.4 million.  The difference between the original issue
price and the repurchase price has been accounted for as a reduction in retained
earnings.


NOTE 8.     INCOME TAXES

Income before provision for income taxes and the components of the provision for
income taxes consisted of the following:

<TABLE>
<CAPTION>
 
Year Ended December 31,                      1995       1994       1993
(In thousands)
------------------------------------------------------------------------
<S>                                        <C>        <C>        <C>
Income (loss) before provision for
 income taxes:
    Domestic                                $6,043    $23,709    $ 7,677
    Foreign                                  2,300      2,086     (2,872)
    Eliminations                               743       (231)    (1,376)
                                            ------    -------    -------
         Total income before provision      $9,086    $25,564    $ 3,429
                                            ------    -------    -------
 
Provision for income taxes:
    Federal
       Current                              $ (400)   $ 8,812    $ 5,175
       Deferred                                222     (3,567)    (5,605)
                                            ------    -------    -------
                                              (178)     5,245       (430)
                                            ------    -------    -------
 
    State
       Current                                (166)     1,362      1,102
       Deferred                                621       (748)    (1,217)
                                            ------    -------    -------
                                               455        614       (115)
                                            ------    -------    -------
 
    Foreign
       Current                               1,924      1,438        263
       Deferred                               (170)        --         --
                                            ------    -------    -------
                                             1,754      1,438        263
                                            ------    -------    -------
 
         Total provision (benefit)          $2,031    $ 7,297    $  (282)
                                            ------    -------    -------
 
</TABLE>

                                       30
<PAGE>
 
The provision for income taxes differs from the amounts obtained by applying the
Federal statutory rate to income before taxes as follows:

<TABLE>
<CAPTION>
                                             1995       1994      1993
----------------------------------------------------------------------
<S>                                        <C>        <C>        <C>
Federal statutory tax rate                    35.0%      35.0%    35.0%
Research and development tax credits         (18.9)     (13.0)   (67.1)
Foreign subsidiary income                      7.5        1.8     29.4
Non deductible expenses                        6.5        2.1      3.7
Foreign Sales Corp. benefits                  (4.4)      (1.8)    (1.8)
Foreign tax credit                            (3.4)       0.2     (2.7)
State taxes, net of Federal income tax     
 benefit                                       3.1        1.6     (7.9)
Other                                         (3.0)       2.6      3.2
                                           -------    -------    -----
 
  Provision rate                              22.4%      28.5%   (8.2)%
                                           -------    -------    -----
</TABLE> 
 
The components of deferred tax assets were as follows:

<TABLE> 
<CAPTION> 
 
Year Ended December 31,                       1995       1994
(In thousands)
-------------------------------------------------------------
<S>                                        <C>        <C>    
Reserves not currently deductible          $10,320    $12,779
Inventory amortization                       4,142      5,005
Accruals not currently deductible            4,375      4,959
Vacation accrual                             2,574      2,471
Research and development credit 
 carryback                                   4,347      2,629
Depreciation                                 1,546        933
State income tax accruals                   (1,247)    (1,368)
Capitalized asset                              253        620
Other                                          766        698
                                           -------    -------
 
   Deferred tax assets                     $27,076    $28,726
                                           -------    -------
</TABLE>

NOTE 9.  DISCLOSURE OF THE IMPACT THAT RECENTLY ISSUED FINANCIAL STANDARDS WILL
HAVE ON THE FINANCIAL STATEMENTS WHEN ADOPTED IN A FUTURE PERIOD

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, ("SFAS No. 121"), "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of".  This
statement is effective for financial statements with periods beginning after
December 15, 1995.   The Company anticipates adopting SFAS No. 121 and this
adoption will not have a material effect on the financial statements.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, ("SFAS  No. 123"),"Accounting for Stock-Based
Compensation".  This statement is effective for financial statements with
periods beginning after December 15, 1995.  The Company anticipates adopting the
disclosure provisions of SFAS No. 123 and this adoption will not have a material
effect on the financial statements.

                                       31
<PAGE>
 
NOTE 10. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates in one industry segment: the development, manufacture and
sale of medical diagnostic ultrasound imaging systems and image management
products.  Acuson products are primarily manufactured at the world headquarters
in Mountain View, California, and are sold through a direct sales force in North
America, Europe, Australia and Japan, and through distributors in Europe, Asia,
South America and the Middle East.  Sales from domestic operations to
subsidiaries are recorded on the basis of arms-length prices established by the
Company.

A summary of the Company's operations by geographic area for the three years
ended December 31, 1995 is as follows:

<TABLE>
<CAPTION>
 
                                           From           From         From Other      Total From
                                         Domestic       European         Foreign         Foreign
(In thousands)                          Operations     Operations      Operations      Operations      Eliminations        Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>     <C>             <C>             <C>             <C>             <C>              <C>
Sales to                        1995       $249,231        $69,144         $10,547         $79,691         $     --        $328,922
unaffiliated                    1994        279,753         57,928          12,803          70,731               --         350,484
customers                       1993        249,473         38,673           7,143          45,816               --         295,289
-----------------------------------------------------------------------------------------------------------------------------------
 
Transfers between               1995       $ 43,367        $    --         $    --         $    --         $(43,367)       $     --
  geographic areas              1994         38,432             --              --              --          (38,432)             --
                                1993         27,907             --              --              --          (27,907)             --
-----------------------------------------------------------------------------------------------------------------------------------
 
Total sales                     1995       $292,598        $69,144         $10,547         $79,691         $(43,367)       $328,922
                                1994        318,185         57,928          12,803          70,731          (38,432)        350,484
                                1993        277,380         38,673           7,143          45,816          (27,907)        295,289
-----------------------------------------------------------------------------------------------------------------------------------
 
Operating income                1995       $  2,775        $ 2,961         $(1,354)        $ 1,607         $    743        $  5,125
(loss)                          1994         20,515          1,529             185           1,714             (231)         21,998
                                1993          3,361         (5,019)          1,798          (3,221)          (1,376)         (1,236)

-----------------------------------------------------------------------------------------------------------------------------------
 
Income (loss)                   1995       $  6,110        $ 3,405         $(1,172)        $ 2,233         $    743        $  9,086
before income taxes             1994         23,709          1,744             342           2,086             (231)         25,564
                                1993          7,677         (4,774)          1,902          (2,872)          (1,376)          3,429
-----------------------------------------------------------------------------------------------------------------------------------
 
Identifiable assets             1995       $241,963        $51,759         $ 8,189         $59,948         $ (6,058)       $295,853
                                1994        257,915         40,467           8,869          49,336           (2,613)        304,638
                                1993        237,760         31,902           7,475          39,377           (6,056)        271,081
-----------------------------------------------------------------------------------------------------------------------------------
 
</TABLE>

FOREIGN SALES Shipments to foreign customers from both domestic and foreign
operations for each of the three years ended December 31, were as follows:

<TABLE>
<CAPTION>
 
                    European   Other Foreign    Total Foreign   Foreign Sales as %
 (In thousands)      Sales       Sales               Sales        of Total Sales
--------------------------------------------------------------------------------------- 
<S>                 <C>        <C>              <C>             <C>
      1995           $86,249       $35,359        $121,608                37.0%
      1994            74,205        36,939         111,144                31.7
      1993            51,700        26,798          78,498                26.6
 
</TABLE>

                                       32
<PAGE>
 
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To Acuson Corporation:

We have audited the accompanying consolidated balance sheets of Acuson
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995.  These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Acuson Corporation and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.



/s/ Arthur Andersen LLP



San Jose, California
February 2, 1996

                                       33
<PAGE>
 
SUPPLEMENTARY INFORMATION
QUARTERLY DATA (Unaudited)


<TABLE>
<CAPTION>
 
 
1995 Quarter Ended
(In thousands, except per share amounts)   DEC. 31   SEPT. 30   JULY 1    APRIL 1
---------------------------------------------------------------------------------
<S>                                        <C>       <C>        <C>       <C>
Net sales                                  $83,642    $75,375   $81,939   $87,966
Gross profit                                43,727     40,031    44,677    47,483
Income before income taxes                   1,837      2,668     1,428     3,153
Net income                                   1,908      1,894     1,014     2,239
Earnings per share                            0.07       0.07      0.04      0.08
 
 
1994 Quarter Ended
(In thousands, except per share amounts)   DEC. 31     OCT. 1    JULY 2   APRIL 2
---------------------------------------------------------------------------------
Net sales                                  $83,259    $86,386   $88,014   $92,825
Gross profit                                46,499     49,344    49,545    52,932
Income before income taxes                   4,492      4,651     6,291    10,130
Net income                                   3,860      3,734     4,089     6,584
Earnings per share                            0.13       0.13      0.14      0.23
 
 
</TABLE>

ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.



PART III

To be filed by amendment to Form 10-K pursuant to General Instruction G (3).

                                       34
<PAGE>
 
PART IV
ITEM 14
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K


(a) The following documents are filed as part of this Form 10-K:



     (1)   Financial Statements. The following consolidated financial statements
           of Acuson Corporation and Report of Independent Public Accountants
           are included in Part II, Item 8 of this report.
 
 
             Consolidated Statements of Operations --
             For the Three Years Ended December 31, 1995
 
             Consolidated Balance Sheets -- As of
             December 31, 1995 and 1994
 
             Consolidated Statements of Stockholders'
             Equity -- For the Three Years Ended
             December 31, 1995
 
             Consolidated Statements of Cash Flows --
             For the Three Years Ended December 31, 1995
 
             Notes to Consolidated Financial Statements
 
             Report of Independent Public Accountants
 
             Supplementary Information
             Quarterly Data (Unaudited)
 
     (2)   Financial Statement Schedules. The following financial statement
           schedule of Acuson Corporation for the three years ended December 31,
           1995 is filed as part of this Form 10-K:
 
<TABLE> 
<CAPTION> 
                                                                             Page
                                                                             ----
          <S>                                                                <C> 
           Report of Independent Public Accountants on Valuation and 
            Qualifying Accounts Schedule                                      S-1
 
           Valuation and Qualifying Accounts For The Three Years Ended 
            December 31, 1995 (Schedule II)                                   S-2
</TABLE> 

           All other schedules are omitted because they are not applicable or
           the required information is shown in the consolidated financial
           statements or notes incorporated in Part II, Item 8 of this report.

                                       35
<PAGE>
 
    (3) Exhibits.  The following Exhibits are filed as part of, or incorporated
by reference into, this Form 10-K:

<TABLE>
<CAPTION>
 
<C>     <S>                                                                                                  <C>             
  3.1   Restated Certificate of Incorporation, as amended (Exhibit 3.8)                                      *
  3.2   Bylaws as amended (Exhibit 3.1)                                                                      @@@
  4.1   Rights Agreement, dated as of May 5, 1988, between Acuson Corporation and The First 
        National Bank of Boston, as Rights Agent (Exhibit 1)                                                 ***
 10.1   The Company's 401(k) Plan, as amended (Exhibit 10.1)                                                 ****(1)
 10.2   The Company's 1986 Employee Stock Purchase Plan (the "1986 Purchase Plan"), as amended 
        (Exhibit 10.2)                                                                                          /(1)
 10.3   Form of Employee Stock Purchase Agreement to be used under the 1986 Purchase Plan (Exhibit 10.5 )       *(1)
 10.4   The Company's 1982 Incentive Stock Option Plan, as amended (Exhibit 10.4)                               /(1)
 10.5   Form of Incentive Stock Option and related exercise documents (Exhibit 10.5)                           **(1)
 10.6   The Company's 1986 Supplemental Stock Option Plan, as amended (Exhibit 10.6)                            /(1)
 10.7   Form of Supplemental Stock Option (Exhibit 10.7)                                                        /(1)
 10.8   Series A Preferred Stock Purchase Agreement, dated January 6, 1982, between the Company and the 
        Purchasers listed on Schedule A thereto (Exhibit 10.8)                                               *
 10.9   Series B Preferred Stock Purchase Agreement, dated March 29, 1983, between the Company and the 
        Purchasers listed on Schedule A thereto (Exhibit 10.9)                                               *
10.10   Series C Convertible Preferred Stock Purchase Agreement, dated March 30, 1984, between the 
        Company and the Purchasers listed on Exhibit A thereto (Exhibit 10.10)                               *
10.11   Lease of office space, dated May 15, 1990, between Shoreline Investments III   
        and the Company (Exhibit 19.1)                                                                       ++
10.12   Lease of office space, dated May 15, 1990, between Shoreline Investments III and the Company 
        (Exhibit 19.2)                                                                                       ++
10.13   Lease of office space, dated May 15, 1990, between Shoreline Investments III and the Company 
        (Exhibit 19.3)                                                                                       ++
10.14   Lease of office space, dated May 15, 1990, between Shoreline Investments VI and the Company 
        (Exhibit 19.4)                                                                                       ++
10.15   Lease of office space, dated May 15, 1990, between Shoreline Investments V and the Company 
        (Exhibit 19.5)                                                                                       ++
10.16   Lease of office space, dated May 15, 1990, between Shoreline Investments VI and the Company 
        (Exhibit 19.6)                                                                                       ++
10.17   Lease of office space, dated May 15, 1990, between Shoreline Investments VI and the Company 
        (Exhibit 19.7)                                                                                       ++
10.18   Lease of office space, dated May 15, 1990, between Shoreline Investments VII and the Company 
        (Exhibit 19.8)                                                                                       ++
</TABLE>

                                       36
<PAGE>
 
<TABLE>
 
<S>            <C>                                                                                           <C> 
10.19          The Company's 1991 Stock Incentive Plan (Exhibit 19.1)                                          +++(1)
10.20          Form of the Company's Supplemental and Non-Employee Director Supplemental                         /(1)
               Options under the 1991 Stock Incentive Plan and related exercise documents 
               as amended (Exhibit 10.23)                                                                      
10.21          Non-Negotiable Secured Promissory Note, dated August 8, 1991, of Daniel R. Dugan               ++++(1)
               (Exhibit 19.1)                                                                                
10.22          Second Deed of Trust, dated August 8, 1991, between Daniel R. Dugan and First American         ++++
               Title Insurance Company as Trustee (Exhibit 19.2)                                             
10.23          Lease of office space, dated July 31, 1991, between Shoreline Investments V and the            ++++
               Company (Exhibit 19.3)                                                                           
10.24          First Amendment to the Company's 401(k) Plan (Exhibit 10.31)                                      #(1)
10.25          Lease of office space, dated January 31, 1992, between Shoreline Investments V and               ##
               the Company (Exhibit 19.1)
10.26          Credit Agreement between Acuson Corporation and the First National Bank of Boston, as Agent,    ###
               dated July 2, 1992 (Exhibit 19.1)                                                              
10.27          Officers' Bonus Plan (Exhibit 10.30)                                                           ####(1)
10.28          Form of Amendment Number 1 to Supplemental Stock Option Terms Under the Company's 1986         ////(1)
               Supplemental Stock Plan and 1991 Stock Incentive Plan (Exhibit 10.1)                          
10.29          Form of Supplemental Stock Option Terms Under the Company's 1991 Stock Incentive Plan          ////(1)
               (Exhibit 10.2)                                                                               
10.30          Amended and Restated Credit agreement, dated April 14, 1995 (Exhibit 10.1)                       @@
10.31          The Company's 1995 Employee Stock Purchase Plan (Exhibit 10.1)                                  @@@(1)
10.32          The Company's 1995 Stock Incentive Plan (Exhibit 10.2)                                          @@@(1)
11.1           Statement regarding computation of per share earnings for the fiscal year ended                 /
               December 31, 1993 (Exhibit 11.2)                                                              
11.2           Statement regarding computation of per share earnings for the fiscal period ended              //
               April 2, 1994 (Exhibit 11.1)                                                                  
11.3           Statement regarding computation of per share earnings for the fiscal period ended             ///
               July 2, 1994 (Exhibit 11.1)                                                                   
11.4           Statement regarding computation of per share earnings for the fiscal period ended            ////
               October 1, 1994 (Exhibit 11.1)                                                                
11.5           Statement regarding computation of per share earnings for the fiscal year ended                @
               December 31, 1994 (Exhibit 11.6)                                                             
11.6           Statement regarding computation of per share earnings for the fiscal period ended             @@
               April 1, 1995 (Exhibit 11.1)                                                                  
22.1           Subsidiaries of Registrant               
24.1           Consent of Independent Public Accountants
27.1           Financial Data Schedule for the year ended December 31, 1995
</TABLE> 

                                       37
<PAGE>
 
(b) The Registrant filed no reports on Form 8-K during the last quarter of the
    fiscal year ended December 31, 1995.
 
 
*      Incorporated by reference to the indicated exhibit in the Company's
       Registration Statement on Form S-1 (File No. 33-7838), as amended.
**     Incorporated by reference to the indicated exhibit in the Company's Form
       10-K Annual Report for the fiscal year ended December 31, 1987.
***    Incorporated by reference to the indicated exhibit in the Company's Form
       8-K dated May 5, 1988.
****   Incorporated by reference to the indicated exhibit in the Company's Form
       10-K Annual Report for the fiscal year ended December 31, 1990.
+      Incorporated by reference to the indicated exhibit in the Company's Form
       10-K Annual Report for the fiscal year ended December 31, 1989.
++     Incorporated by reference to the indicated exhibit in the Company's Form
       10-Q Quarterly Report for the quarterly period ended June 30, 1990.
+++    Incorporated by reference to the indicated exhibit in the Company's Form
       10-Q Quarterly Report for the quarterly period ended June 29, 1991.
++++   Incorporated by reference to the indicated exhibit in the Company's Form
       10-Q Quarterly Report for the quarterly period ended September 28, 1991.
#      Incorporated by reference to the indicated exhibit in the Company's Form
       10-K Annual Report for the fiscal year ended December 31, 1991.
##     Incorporated by reference to the indicated exhibit in the Company's Form
       10-Q Quarterly Report for the quarterly period ended March 28, 1992.
###    Incorporated by reference to the indicated exhibit in the Company's Form
       10-Q Quarterly Report for the quarterly period ended September 26, 1992. 
####   Incorporated by reference to the indicated exhibit in the Company's Form
       10-K Annual Report for the fiscal year ended December 31, 1992.
/      Incorporated by reference to the indicated exhibit in the Company's Form
       10-K Annual Report for the fiscal year ended December 31, 1993.
//     Incorporated by reference to the indicated exhibit in the Company's Form
       10-Q Quarterly Report for the quarterly period ended April 2, 1994.
///    Incorporated by reference to the indicated exhibit in the Company's Form
       10-Q Quarterly Report for the quarterly period ended July 2, 1994.
////   Incorporated by reference to the indicated exhibit in the Company's Form
       10-Q Quarterly Report for the quarterly period ended October 1, 1994.
@      Incorporated by reference to the indicated exhibit in the Company's Form
       10-K Annual Report for the fiscal year ended December 31, 1994.
@@     Incorporated by reference to the indicated exhibit in the Company's Form
       10-Q Quarterly Report for the quarterly period ended April 1, 1995.

                                       38
<PAGE>
 
@@@      Incorporated by reference to the indicated exhibit in the Company's
         Form 10-Q Quarterly Report for the quarterly period ended July 1, 1995.
 
(1)      Management contract or compensatory plan required to be filed as an 
         exhibit.
 
 
SIGNATURES



  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

<TABLE>
<CAPTION>
 
                             ACUSON CORPORATION
<S>                             <C> 
 
March 29, 1996                   By /s/ Samuel H. Maslak
                                    ---------------------------------
                                    Samuel H. Maslak
                                    Chairman and Chief
                                    Executive Officer
 

 
March 29, 1996                   By /s/ Robert J. Gallagher
                                    ---------------------------------
                                    Robert J. Gallagher
                                    President and Chief Operating Officer



March 29, 1996                   By /s/ Stephen T. Johnson
                                    ----------------------------------     
                                    Stephen T. Johnson
                                    Vice President, Chief Financial Officer
                                    and Treasurer (Principal
                                    Financial and Accounting Officer)

</TABLE> 

                                       39
<PAGE>
 
SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

SIGNATURE                        TITLE                                     DATE
-----------------------------------------------------------------------------------------
<S>                              <C>                                       <C>  
 
/s/ Samuel H. Maslak             Chairman  and Chief  Executive            March 29, 1996    
-----------------------------    Officer                                                     
     (Samuel H. Maslak)                                                                      
                                                                                             
                                                                                             
/s/ Robert J. Gallagher          President, Chief Operating                March 29, 1996    
-----------------------------    Officer and Director                                      
    (Robert J. Gallagher)                                                                    
                                                                                             
                                                                                             
/s/Stephen T. Johnson            Vice President, Chief Financial           March 29, 1996    
-----------------------------    Officer and Treasurer                                   
    (Stephen T. Johnson)         (Principal Financial and                                    
                                 Accounting Officer)                                         
                                                                                             
                                                                                             
/s/ Royce Diener                 Director                                  March 29, 1996    
-----------------------------                                                                
(Royce Diener)                                                                               
                                                                                             
                                                                                             
/s/ Albert L. Greene             Director                                  March 29, 1996    
-----------------------------                                                                
(Albert L. Greene)                                                                           
                                                                                             
                                                                                             
/s/ Karl H. Johannsmeier         Director                                  March 29, 1996    
-----------------------------                                                                
(Karl H. Johannsmeier)                                                                       
                                                                                             
                                                                                             
/s/ Alan C. Mendelson            Director                                  March 29, 1996     
-----------------------------
(Alan C. Mendelson)
----------------------------------------------------------------------------------------- 
</TABLE>

                                       40
<PAGE>
 
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE


  We have audited in accordance with generally accepted auditing standards, the
financial statements included in this Form 10-K, and have issued our report
thereon dated February 2, 1996.  Our audit was made for the purpose of forming
an opinion on those statements taken as a whole.  The schedule listed at Part
IV, Item 14(a)(2) is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.



/s/ Arthur Andersen LLP
 



San Jose, California
February 2, 1996

                                      S-1
<PAGE>
 
ACUSON CORPORATION                                                  SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
(In thousands)

<TABLE>
<CAPTION>
 
 
                                                             CHARGED TO
                                      BALANCE AT BEGINNING    COSTS AND                  BALANCE AT END
                                           OF PERIOD          EXPENSES     WRITE-OFFS      OF PERIOD
                                      --------------------   -----------   -----------   --------------
<S>                                   <C>                    <C>           <C>           <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
     Year ended:
          December  31, 1993                  $2,592             $  701       $  (449)       $2,844
          December  31, 1994                  $2,844             $  597       $    (9)       $3,432
          December  31, 1995                  $3,423             $ (175)      $  (259)       $2,998
 
ACCRUED WARRANTY:
      Year ended:
          December  31, 1993                  $4,031             $6,235       $(6,979)       $3,287
          December  31, 1994                  $3,287             $7,949       $(6,761)       $4,475
          December  31, 1995                  $4,475             $8,146       $(8,181)       $4,440
 
</TABLE>

                                      S-2