Inventory

12 Months Ended

Oct. 31, 2022

Inventory at October 31, 2022 and 2021 consisted of the following (amounts in thousands):


	2022		2021
Land controlled for future communities	$	240,751	$	185,656
Land owned for future communities	808,851		564,737
Operating communities	7,683,724		7,165,491
	$	8,733,326	$	7,915,884

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 12 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, do not have any remaining backlog, and are not expected to reopen within 12 months of the end of the fiscal period being reported on are included in land owned for future communities. Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”).

The amounts we have provided for inventory impairment charges and the expensing of costs that we believed not to be recoverable in each of the three fiscal years ended October 31, 2022, 2021, and 2020, are shown in the table below (amounts in thousands):


Charge:	2022		2021		2020
Land controlled for future communities	$	13,051	$	5,620	$	23,539
Land owned for future communities	19,690		19,805		31,669
Operating communities	—		1,110		675
	$	32,741	$	26,535	$	55,883

See Note 12, “Fair Value Disclosures,” for information regarding (1) 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 value of those communities, net of impairment charges. and (2) the number of future communities impaired, the amount of impairment charges recognized, and the fair value of those communities, net of impairment charges.

See Note 14, “Commitments and Contingencies,” for information regarding land purchase contracts.

At October 31, 2022, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether 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 maximum exposure to loss is generally

limited to deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers generally have no recourse against us. At October 31, 2022, we determined that 237 land purchase contracts, with an aggregate purchase price of $3.89 billion, on which we had made aggregate deposits totaling $417.6 million, were VIEs, but that we were not the primary beneficiary of any VIE related to such land purchase contracts. At October 31, 2021, we determined that 289 land purchase contracts, with an aggregate purchase price of $3.67 billion, on which we had made aggregate deposits totaling $302.4 million, were VIEs, but that we were not the primary beneficiary of any VIE related to such land purchase contracts.

Interest incurred, capitalized, and expensed in each of the three fiscal years ended October 31, 2022, 2021, and 2020, was as follows (amounts in thousands):


	2022		2021		2020
Interest capitalized, beginning of year	$	253,938	$	297,975	$	311,323
Interest incurred	135,029		152,986		172,530
Interest expensed to home sales cost of revenues	(164,831)		(187,237)		(174,375)
Interest expensed to land sales and other cost of revenues	(5,788)		(4,372)		(5,443)
Interest expensed in other income – net	—		—		(2,440)
Interest reclassified to property, construction and office equipment - net	—		(1,034)		—
Interest capitalized on investments in unconsolidated entities	(6,699)		(4,574)		(3,835)
Previously capitalized interest transferred to investments in unconsolidated entities	(2,412)		—		—
Previously capitalized interest on investments in unconsolidated entities transferred to inventory	231		194		215
Interest capitalized, end of year	$	209,468	$	253,938	$	297,975

During the years ended October 31, 2022 and October 31, 2021, we recognized approximately $(2.9) million and $0.9 million of net (gains) losses related to our interest rate swaps which is included in accumulated other comprehensive income, respectively, and approximately $(31,300) and $211,000 of net (gains) losses were reclassified out of accumulated other comprehensive income to home sales cost of revenues, respectively. No similar amounts were incurred during the year ended October 31, 2020.