Inventory

Inventory at April 30, 2012 and October 31, 2011 consisted of the following (amounts in thousands):



	April 30, 2012		October 31, 2011
Land controlled for future communities	$	41,442	$	46,581
Land owned for future communities	1,046,240		979,145
Operating communities	2,680,195		2,390,997
	$	3,767,877	$	3,416,723

Operating communities include communities offering homes for sale, communities that have sold all available home sites but have not completed delivery of the homes, communities that were previously offering homes for sale but are temporarily closed due to business conditions or non-availability of improved home sites and that are expected to reopen within twelve months of the end of the fiscal period being reported on, and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities and the carrying cost of model homes, less impairment charges recognized against the communities.

Communities that were previously offering homes for sale but are temporarily closed due to business conditions that do not have any remaining backlog and are not expected to reopen within twelve months of the end of the fiscal period being reported on have been classified as land owned for future communities.

Information regarding the classification, number and carrying value of these temporarily closed communities, as of the date indicated, is provided in the table below.



	April 30, 2012		October 31, 2011
Land owned for future communities:
Number of communities	33		43
Carrying value (in thousands)	$	194,678	$	256,468
Operating communities:
Number of communities	13		2
Carrying value (in thousands)	$	67,222	$	11,076

During the three-month period ended January 31, 2011, the Company reclassified $20.0 million of inventory related to commercial retail space located in one of its high-rise projects to property, construction and office equipment. The $20.0 million was reclassified due to the completion of construction of the facilities and the substantial completion of the high-rise project of which the facilities are a part.

The Company provided for inventory impairment charges and the expensing of costs that it believed not to be recoverable, for the periods indicated; these are shown in the table below (amounts in thousands).



	Six months ended April 30,				Three months ended April 30,
	2012		2011		2012			2011
Charge (recovery):
Land controlled for future communities	$	225	$	1,848	$	(552	)	$	2,197
Land owned for future communities	918		—		—			—
Operating communities	8,985		16,200		2,560			10,725
	$	10,128	$	18,048	$	2,008		$	12,922

The table below provides, for the periods indicated, the number of operating communities that the Company tested for potential impairment, the number of operating communities in which it recognized impairment charges, the amount of impairment charges recognized, and, as of the end of the period indicated, the fair value of those communities, net of impairment charges ($ amounts in thousands).



		Impaired operating communities
Three months ended:	Number of communities tested	Number of communities	Fair value of communities, net of impairment charges		Impairment charges
Fiscal 2012:
January 31	113	8	$	49,758	$	6,425
April 30	115	2	$	22,962	2,560
					$	8,985
Fiscal 2011:
January 31	143	6	$	56,105	$	5,475
April 30	142	9	$	40,765	10,725
July 31	129	2	$	867	175
October 31	114	3	$	3,367	710
					$	17,085

At April 30, 2012, the Company evaluated its land purchase contracts to determine if any of the selling entities were VIEs and, if they were, whether the Company was the primary beneficiary of any of them. Under these land purchase contracts, the Company does not possess legal title to the land and its risk is generally limited to deposits paid to the sellers and the creditors of the sellers generally have no recourse against the Company. At April 30, 2012, the Company determined that 56 land purchase contracts, with an aggregate purchase price of $484.4 million, on which it had made aggregate deposits totaling $24.2 million, were VIEs, but that it was not the primary beneficiary of any VIE related to its land purchase contracts.

Interest incurred, capitalized and expensed, for the periods indicated, was as follows (amounts in thousands):



	Six months ended April 30,						Three months ended April 30,
	2012			2011			2012			2011
Interest capitalized, beginning of period	$	298,757		$	267,278		$	311,335		$	274,730
Interest incurred	60,467			58,434			31,568			28,718
Interest expensed to cost of revenues	(33,989		)	(35,382		)	(17,668		)	(17,300		)
Interest directly expensed to operations	—			(1,504		)	—			(392		)
Write-off against other income	(1,582		)	(318		)	(1,582		)	(248		)
Interest reclassified to property, construction and office equipment	—			(3,000		)	—			—
Interest capitalized on investments in unconsolidated entities	(1,137		)	—			(1,137		)	—
Interest capitalized, end of period	$	322,516		$	285,508		$	322,516		$	285,508

Inventory impairment charges are recognized against all inventory costs of a community, such as land, land improvements, cost of home construction and capitalized interest. The amounts included in the table directly above reflect the gross amount of capitalized interest without allocation of any impairment charges recognized. The Company estimates that, had inventory impairment charges been allocated on a pro-rata basis to the individual components of inventory, capitalized interest at April 30, 2012 and 2011 would have been reduced by approximately $52.8 million and $54.5 million, respectively.