Accrued Expenses

12 Months Ended

Oct. 31, 2022

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


	2022		2021
Land, land development and construction	$	334,975	$	310,996
Compensation and employee benefits	223,609		232,161
Escrow liability	44,115		36,107
Self-insurance	251,576		236,369
Warranty	164,409		145,062
Lease liabilities	139,664		116,248
Deferred income	50,973		36,638
Interest	31,988		34,033
Commitments to unconsolidated entities	26,905		22,150
Other	77,773		50,471
	$	1,345,987	$	1,220,235

At the time each home is closed and title and possession are transferred to the home buyer, we record an initial accrual for expected warranty costs on that home. Our initial accrual for expected warranty costs is based upon historical warranty claim experience. Adjustments to our warranty liabilities related to homes delivered in prior periods are recorded in the period in which a change in our estimate occurs. The table below provides a reconciliation of the changes in our warranty accrual during

fiscal 2022, 2021, and 2020 (amounts in thousands):


	2022		2021		2020
Balance, beginning of year	$	145,062	$	157,351	$	201,886
Additions - homes closed during the year	42,423		42,316		36,103
Addition - liabilities assumed	150		100		190
Increase in accruals for homes closed in prior years - net (1)	39,433		9,155		6,711
Reclassification from self-insurance accruals	—		3,618		—

Decrease to water intrusion accrual	—		(11,823)		(24,400)
Charges incurred	(62,659)		(55,655)		(63,139)
Balance, end of year	$	164,409	$	145,062	$	157,351

(1) The fiscal 2022 amount includes an additional $29.0 million of warranty charges expected to be recovered from our insurance carriers and suppliers, which are recorded as a receivable at October 31, 2022 and is included in “Receivables, prepaid expenses, and other assets” on our 2022 Consolidated Balance Sheet.

Since fiscal 2014, we have received water intrusion claims from owners of homes built since 2002 in communities located in Pennsylvania and Delaware (which are in our North region). We continue to perform review procedures to assess, among other things, the number of affected homes, whether repairs are likely to be required, and the extent of such repairs.

Our review process, conducted quarterly, includes an analysis of many factors to determine whether a claim is likely to be received and the estimated costs to resolve any such claim, including: the closing dates of the homes; the number of claims received; our inspection of homes; an estimate of the number of homes we expect to repair; the type and cost of repairs that have been performed in each community; the estimated costs to remediate pending and future claims; the expected recovery from our insurance carriers and suppliers; and the previously recorded amounts related to these claims. We also monitor legal developments relating to these types of claims and review the volume, relative merits and adjudication of claims in litigation or arbitration.

From October 31, 2016 through the second quarter of fiscal 2020, our recorded aggregate estimated repair costs to be incurred for known and unknown water intrusion claims was $324.4 million and our recorded aggregate expected recoveries from insurance carriers and suppliers were approximately $152.6 million. Based on trends in claims experience over several years and lower than anticipated repair costs, in the second fiscal quarter of 2020 and again in the fourth fiscal quarter of 2021, we reduced the aggregate estimated repair costs to be incurred for known and unknown water intrusion claims by a total of $36.2 million. Because these reductions were associated with periods in which we expect our insurance deductibles and self-insured retentions to be exhausted, we reduced our aggregate expected recoveries from insurance carriers and suppliers by a corresponding $36.2 million. Our recorded remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to resolve claims, were approximately $46.9 million at October 31, 2022 and $54.7 million at October 31, 2021. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately $2.3 million at October 31, 2022 and $5.8 million at October 31, 2021.

As noted above, our review process includes a number of estimates that are based on assumptions with uncertain outcomes. Due to the degree of judgment required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that our actual costs and recoveries could differ from those recorded and such differences could be material. In addition, due to such uncertainty, we are unable to estimate the range of any such differences.