Inventory

Inventory at July 31, 2013 and October 31, 2012 consisted of the following (amounts in thousands):



	July 31, 2013		October 31, 2012
Land controlled for future communities	$	91,659	$	56,300
Land owned for future communities	1,030,973		1,040,373
Operating communities	3,394,376		2,664,514
	$	4,517,008	$	3,761,187

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.

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.



	July 31, 2013		October 31, 2012
Land owned for future communities:
Number of communities	17		40
Carrying value (in thousands)	$	102,017	$	240,307
Operating communities:
Number of communities	27		5
Carrying value (in thousands)	$	163,312	$	34,685

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



	Nine months ended July 31,				Three months ended July 31,
	2013		2012		2013		2012
Charge:
Land controlled for future communities	$	837	$	661	$	139	$	435
Land owned for future communities	—		918		—		—
Operating communities	1,140		11,670		100		2,685
	$	1,977	$	13,249	$	239	$	3,120

See Note 13, "Fair Value Disclosures," for information regarding 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 the fair values of those communities, net of impairment charges.

At July 31, 2013, the Company evaluated its land purchase contracts to determine if any of the selling entities were variable interest entities ("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 July 31, 2013, the Company determined that 85 land purchase contracts, with an aggregate purchase price of $1.1 billion, on which it had made aggregate deposits totaling $43.3 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, for the periods indicated, was as follows (amounts in thousands):



	Nine months ended July 31,						Three months ended July 31,
	2013			2012			2013			2012
Interest capitalized, beginning of period	$	330,581		$	298,757		$	347,549		$	322,516
Interest incurred	100,066			93,027			36,015			32,560
Interest expensed to cost of revenues	(71,905		)	(59,823		)	(28,915		)	(25,834		)
Write-off against other income	(2,045		)	(1,664		)	(824		)	(82		)
Interest capitalized on investments in unconsolidated entities	(4,510		)	(2,260		)	(1,638		)	(1,123		)
Interest capitalized, end of period	$	352,187		$	328,037		$	352,187		$	328,037

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 July 31, 2013 and 2012 would have been reduced by approximately $40.5 million and $50.6 million, respectively.