Standard Financial Statements: A Case

¶ … Standard Financial Statements: A Case Study Like most global companies, the microprocessor and graphics products manufacturer and marketer AMD suffered during the recession in 2008, though the company did not fair as poorly as many others. Between sales declines on one hand and major restructuring on the other, the company's financial statements suggest an entity with a great deal of staying power that definitely took some losses in 2008 yet remains profitable, innovative, and poised for growth when the market wile bar it.

A somewhat deeper analysis of the company's annual report also demonstrates how AMD uses and reports its financial information, to the public and its investors as well as internally in its decision-making. Informing Investors The letter at the beginning of the annual report from CEO and president of AMD Dirk Meyer sets the tone for the interpretation of the financial data that appears later in the report -- some passages, in fact, appear to be repeated wholesale later on.

This is especially true of the repeated invocations of the global recession, which is used as a background explanation for all company losses and most the organization's actions during 2008 (Meyer 2009). Though this recession undoubtedly had an impact on the company, and indeed was likely the primary cause behind the falling numbers witnessed by AMD in 2008, it also quite clearly becomes a form of spin within the annual report to assuage investor worries concerning the company's financial strength and fortitude in the near future.

Other financial information is presented in an equally leading manner; though not inaccurate or even untruthful, the presentation of financial information to investors in the company's annual report is unabashedly aimed at minimizing any culpability on the part of the organization for its losses while extolling the decisiveness and pragmatism of the company's reactions to the global recession. The contractual obligations that the company must meet in the near-term, for instance, are quite complex in their ultimate effect on the company and relative to AMD's current financial position.

Yet they are presented in what appears to be a very straightforward table that indicates greatly reduced obligations within the next five years, which is borne out by the length explanation that follows (AMD 2009, pp. 75-84). Problems of capital achievement in these years are not addressed, nor is the impact of the immediate repayment of many of these obligations directly noted.

Internal Decision-Making Despite the highly purposeful construction of the annual report, however, there are no inaccuracies or deliberate attempts to mislead investors immediately apparent in AMD's assessment of its financial situation, and indeed the annual report provides an excellent roadmap for the company's decision-making process during the year. Its divestment of certain operations was a direct response to the reduced capital -- through heightened repayment obligations and the loss in sales -- that the company experienced and continues to predict for the immediate future (AMD 2009).

Other company decisions were likewise based on appropriate and immediate recognition of and response to financial data. At the same time, some of the financial figures that AMD presents in its annual report show operating losses extending back several years before the onset of the recession, in some departments (AMD 2009, pp. 60).

The company's responsiveness to this issue seems to have been slower than the annual report indicates; though the organization was spurred into restructuring and divesting itself of some of its less profitable operations by the recession, some of these problems existed previously. The new partnerships that the company formed during the year also seem to be the result of analysis of.