Inventory

Inventory at January 31, 2015 and October 31, 2014 consisted of the following (amounts in thousands):



	January 31, 2015		October 31, 2014
Land controlled for future communities	$	75,014	$	122,533
Land owned for future communities	2,419,952		2,355,874
Operating communities	4,132,515		4,011,914
	$	6,627,481	$	6,490,321

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. Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”).

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



	January 31, 2015		October 31, 2014
Land owned for future communities:
Number of communities	18		16
Carrying value (in thousands)	$	144,403	$	122,015
Operating communities:
Number of communities	9		9
Carrying value (in thousands)	$	27,451	$	42,092

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



	Three months ended January 31,
	2015		2014
Land controlled for future communities	$	244	$	682
Operating communities	900		1,300
	$	1,144	$	1,982

See Note 13, “Fair Value Disclosures,” for information regarding the number of operating communities that we tested for potential impairment, the number of operating communities in which we recognized impairment charges, the amount of impairment charges recognized, and the fair values of those communities, net of impairment charges.

See Note 15, “Commitments and Contingencies,” for information regarding land purchase commitments.

At January 31, 2015, we evaluated our land purchase contracts to determine if any of the selling entities were VIEs and, if they were, whether we were the primary beneficiary of any of them. Under these land purchase contracts, we do not possess legal title to the land; our risk is generally limited to deposits paid to the sellers; and the creditors of the sellers generally have no recourse against us. At January 31, 2015, we determined that 61 land purchase contracts, with an aggregate purchase price of $597.5 million, on which we had made aggregate deposits totaling $34.6 million, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2014, we determined that 63 land purchase contracts, with an aggregate purchase price of $578.2 million, on which we had made aggregate deposits totaling $30.7 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts.

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



	Three months ended January 31,
	2015			2014
Interest capitalized, beginning of period	$	356,180		$	343,077
Interest incurred	40,504			39,944
Interest expensed to cost of revenues	(28,377		)	(25,440		)
Write-off against other income	(1,328		)	(317		)
Interest capitalized on investments in unconsolidated entities	(2,751		)	(2,457		)
Previously capitalized interest on investments in unconsolidated entities transferred to inventory				1,811
Interest capitalized, end of period	$	364,228		$	356,618

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. We estimate that, had inventory impairment charges been allocated on a pro rata basis to the individual components of inventory, capitalized interest at January 31, 2015 and 2014 would have been reduced by approximately $32.1 million and $37.1 million, respectively.