Phantom Stock Executive Compensation Plans
Unlike the popular market value stock options, stock awards and stock appreciation plans, phantom stock plans do not involve ownership of publicly traded stock, although market based stock may be used as a measurement of the phantom stock plan. Another popular method for valuing phantom stock plans is book value (i.e. assets minus liabilities) It is important to note that phantom stock plans can incorporate any design features of a market based plan. However, under FAS 123R, phantom plans will be treated as a liability award and subject to a variable accrual, unlike market based plans which are considered equity awards and fixed accounting using a pricing model. The company has a tax deduction at time of the recipient having taxable income in the same amount of such income.