target asset allocation and long-term asset class return expectations. Assumptions for the discount rate use  the equivalent single discount rate based on discounting expected plan benefit cash flows using the  Citigroup Pension Discount Curve. For the projected compensation trend rate, short-term and long-term  compensation expectations for participants, including salary increases and performance bonus payments  are considered. For the health care cost trend rate for other postretirement benefits, assumptions are  established for health care cost trends, applying an initial trend rate that reflects recent historical experience  and broader national statistics with an ultimate trend rate that assumes that the portion of gross domestic  product devoted to health care eventually becomes constant. Income taxes are accounted for in accordance with the provisions of Income Taxes Topic, ASC 740.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences  between the financial statement carrying amounts of existing assets and liabilities and their respective tax  bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable  income in the years in which those temporary differences are expected to be recovered or settled. The  effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that  includes the enactment date. Deferred taxes are not provided on undistributed earnings of certain non-U.S.  subsidiaries and business ventures because the company considers those earnings to be permanently  invested abroad. The company’s primary source of revenue is derived from time charter contracts of its vessels on a rate per  day of service basis; therefore, vessel revenues are recognized on a daily basis throughout the contract  period. These vessel time charter contracts are generally either on a term basis (average three months to  two years) or on a “spot” basis. The base rate of hire for a term contract is generally a fixed rate, provided,  however, that term contracts at times include escalation clauses to recover specific additional costs. A spot  contract is a short-term agreement to provide offshore marine services to a customer for a specific short- term job. Spot contract terms generally range from one day to three months. Vessel revenues are  recognized on a daily basis throughout the contract period. There are no material differences in the cost  structure of the company’s contracts based on whether the contracts are spot or term for the operating costs  are generally the same without regard to the length of a contract. Vessel operating costs are incurred on a daily basis and consist primarily of costs such as crew wages,  repair and maintenance, insurance and loss reserves, fuel, lube oil and supplies, vessel operating leases  and other vessel expenses, which include but are not limited to costs such as brokers commissions, training  costs, agent fees, port fees, canal transit fees, temporary importation fees, vessel certification fees, and  satellite communication fees. Repair and maintenance costs include both routine costs and major  drydocking repair costs. Vessel operating costs are recognized as incurred on a daily basis. The U.S. dollar is the functional currency for all of the company’s existing international operations, as  transactions in these operations are predominately denominated in U.S. dollars. Foreign currency exchange  gains and losses are included in the consolidated statements of earnings. The company reports both basic earnings per share and diluted earnings per share. The calculation of basic  earnings per share is based on the weighted average number of shares outstanding and therefore excludes  the dilutive effect of stock options and restricted stock grants. Diluted earnings per share includes the  dilutive effect of stock options and restricted stock grants. Per share amounts disclosed in these Notes to  Consolidated Financial Statements, unless otherwise indicated, are on a diluted basis. Earnings Per Share  Foreign Currency Translation  Operating Costs  Revenue Recognition  Income Taxes  Years ended March 31, 2010, 2009, and 2008  TIDEWATER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-12