TIDEWATER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended March 31, 2010, 2009, and 2008  Concentrations of Credit Risk  Stock-Based Compensation  Comprehensive Income  Derivative Instruments and Hedging Activities  The company’s financial instruments that are exposed to concentrations of credit risk consist primarily of  trade and other receivables from a variety of domestic, international and national energy companies,  including reinsurance companies for recoverable insurance losses. The company manages its exposure to  risk by performing ongoing credit evaluations of its customers’ financial condition and generally does not  require collateral. The company maintains an allowance for doubtful accounts for potential losses based on  expected collectability and does not believe it is generally exposed to concentrations of credit risk that are  likely to have a material adverse impact on the company’s financial position, results of operations, or cash  flows. The company follows Compensation – Stock Compensation, Topic ASC 718, for the expensing of stock  options and other share-based payments. This topic requires that stock-based compensation transactions  be accounted for using a fair-value-based method. The company uses the Black-Scholes option-pricing  model to determine the fair-value of stock-based awards under the Topic. Refer to Note 7 of Notes to  Consolidated Financial Statements for a complete discussion on stock-based compensation.  The company reports total comprehensive income and its components in the financial statements in  accordance with Comprehensive Income, Topic ASC 220. Total comprehensive income represents the net  change in stockholders’ equity during a period from sources other than transactions with stockholders and,  as such, includes net earnings. For the company, accumulated other comprehensive income is comprised  of unrealized gains and losses on available-for-sale securities and derivative financial instruments, currency  translation adjustment and any minimum pension liability for the company’s U.S. Defined Benefits Pension  Plan and Supplemental Executive Retirement Plan. The company periodically utilizes derivative financial instruments to hedge against foreign currency  denominated assets and liabilities and currency commitments. These transactions generally include forward  currency contracts or interest rate swaps that are entered into with major financial institutions. Derivative  financial instruments are intended to reduce the company’s exposure to foreign currency exchange risk and  interest rate risk. The company records derivative financial instruments in its consolidated balance sheets at fair value as  either assets or liabilities. The accounting for changes in the fair value of a derivative instrument depends on  the intended use of the derivative and the resulting designation, which is established at the inception of a  derivative. The company formally documents, at the inception of a hedge, the hedging relationship and the  entity’s risk management objective and strategy for undertaking the hedge, including identification of the  hedging instrument, the hedged item or transaction, the nature of the risk being hedged, the method used to  assess effectiveness and the method that will be used to measure hedge ineffectiveness of derivative  instruments that receive hedge accounting treatment. For derivative instruments designated as foreign currency or interest rate hedges (cash flow hedge),  changes in fair value, to the extent the hedge is effective, are recognized in other comprehensive income  until the hedged item is recognized in earnings. Hedge effectiveness is assessed quarterly based on the  total change in the derivative’s fair value. Amounts representing hedge ineffectiveness are recorded in  earnings. Any change in fair value of derivative financial instruments that are speculative in nature and do  not qualify for hedge accounting treatment is also recognized immediately in earnings. Proceeds received  upon termination of derivative financial instruments qualifying as fair value hedges are deferred and  amortized into income over the remaining life of the hedged item using the effective interest rate method.  F-13