Inventory

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



	2012		2011
Land controlled for future communities	$	56,300	$	46,581
Land owned for future communities	1,040,373		979,145
Operating communities	2,664,514		2,390,997
	$	3,761,187	$	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 year 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.

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 at October 31, 2012, 2011 and 2010 is provided in the table below ($ amounts in thousands).



	2012		2011		2010
Land owned for future communities:
Number of communities	40		43		36
Carrying value (in thousands)	$	240,307	$	256,468	$	212,882
Operating communities:
Number of communities	5		2		13
Carrying value (in thousands)	$	34,685	$	11,076	$	78,100

The Company provided for inventory impairment charges and the expensing of costs that it believed not to be recoverable in each of the three fiscal years ended October 31, 2012, 2011 and 2010 as shown in the table below (amounts in thousands).



Charge:	2012		2011		2010
Land controlled for future communities	$	451	$	17,752	$	6,069
Land owned for future communities	1,218		17,000		55,700
Operating communities	13,070		17,085		53,489
	$	14,739	$	51,837	$	115,258

For information related to the number of operating communities that the Company reviewed for potential impairment, the number of operating communities in which the Company recognized impairment charges, the amount of impairment charges recognized and the fair value of the communities for which an impairment charge was recorded, net of the charge, see Note 12, "Fair Value Disclosures".

At October 31, 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 October 31, 2012, the Company determined that 64 land purchase contracts, with an aggregate purchase price of $540.8 million, on which it had made aggregate deposits totaling $25.5 million, were VIEs and that it was not the primary beneficiary of any VIE related to its land purchase contracts.

Interest incurred, capitalized and expensed in each of the three fiscal years ended October 31, 2012, 2011 and 2010 was as follows (amounts in thousands):



	2012			2011			2010
Interest capitalized, beginning of year	$	298,757		$	267,278		$	259,818
Interest incurred	125,783			114,761			114,975
Interest expensed to cost of revenues	(87,117		)	(77,623		)	(75,876		)
Interest directly expensed in the consolidated statements of operations	—			(1,504		)	(22,751		)
Write-off against other income	(3,404		)	(1,155		)	(8,369		)
Interest reclassified to property, construction and office equipment				(3,000		)	(519		)
Capitalized interest applicable to investments in unconsolidated entities	(3,438		)
Interest capitalized, end of year	$	330,581		$	298,757		$	267,278

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 October 31, 2012, 2011 and 2010 would have been reduced by approximately $47.9 million, $54.0 million and $53.3 million, respectively.

During fiscal 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.