Should participants receive the base value of the phantom stock units, or only participate in growth over and above the base value? The vesting and forfeiture provisions contained in the phantom stock plan or individual grant agreement determine whether and when the executives rights are vested. For the Federal Insurance Contributions Act (FICA), deferred compensation is includible as wages in the later of either the year in which the related services are performed, or the year in which the deferred compensation becomes vested. In addition, although not required for private companies, The SEC staff has indicated no preference as to the order in which data is presented in the financial statements (e.g., whether the most current fiscal period should be displayed as the first or last column in the income statement). Ready to Speak with a Phantom Stock Expert Now?Call (888) 703-0080 or complete our contact form. In most cases, a valuation is required upon the employees termination, death, or disability. If payments are to be made in installments, the phantom stock unit plan or grant agreement should also specify whether interest will accrue on the unpaid installments. Select a section below and enter your search term, or to search all click Phantom stock is a compensation plan that bestows upon the holder the right to receive a cash payment at a specified future point in time usually in conjunction with a specified future event or milestone. Financial statement presentation. It does not allow non-qualified plans to operate like qualified plans, so the plan could be ruled illegal. Report any stock that you acquired as a separate lineentry, using the standard instructions for, 3 - Your Employment Agreements & Arrangements. Here are answers to nine frequently asked questions about phantom stock plans and what they could mean for your company. Equity grants may give rise to voting rights or unforeseen minority rights under state law. A stock appreciation right (SAR) is much like phantom stock, except it provides the right to the monetary equivalent of the increase in the value of a specified number of shares over a specified period of time. Her expertise is in personal finance and investing, and real estate. PDF SBP Footnote Disclosure Template - FinTools Because a phantom stock plan is a nonqualified deferred compensation plan, companies have a lot of flexibility in plan design as long as that flexibility is exercised before the plan becomes effective. Shares are not actually issued or transferred to the option-. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. These include white papers, government data, original reporting, and interviews with industry experts. Your go-to resource for timely and relevant accounting, auditing, reporting and business insights. With that said, the value of the phantom stock at redemption is tied to the companys stock price. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.