Inventory

Inventory at October 31, 2017 and 2016 consisted of the following (amounts in thousands):



	2017		2016
Land controlled for future communities	$	87,158	$	71,729
Land owned for future communities	1,142,870		1,884,146
Operating communities	6,051,425		5,398,092
	$	7,281,453	$	7,353,967

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 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 at October 31, 2017, 2016, and 2015, is provided in the table below ($ amounts in thousands):



	2017		2016		2015
Land owned for future communities:
Number of communities	14		18		15
Carrying value (in thousands)	$	110,732	$	123,936	$	119,138
Operating communities:
Number of communities	6		3		11
Carrying value (in thousands)	$	26,749	$	8,523	$	63,668

We 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, 2017, 2016, and 2015, as shown in the table below (amounts in thousands):



Charge:	2017		2016		2015
Land controlled for future communities	$	1,949	$	3,142	$	809
Land owned for future communities	3,050		2,300		12,600
Operating communities	9,795		8,365		22,300
	$	14,794	$	13,807	$	35,709

See Note 12, “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 value of those communities, net of impairment charges.

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

At October 31, 2017, 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 risk 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, 2017, we determined that 104 land purchase contracts, with an aggregate purchase price of $1.43 billion, on which we had made aggregate deposits totaling $65.6 million, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2016, we determined that 78 land purchase contracts, with an aggregate purchase price of $987.3 million, on which we had made aggregate deposits totaling $44.1 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 in each of the three fiscal years ended October 31, 2017, 2016, and 2015, was as follows (amounts in thousands):



	2017			2016			2015
Interest capitalized, beginning of year	$	369,419		$	373,128		$	356,180
Interest incurred	175,944			164,001			155,170
Interest expensed to cost of revenues	(172,832		)	(160,337		)	(142,947		)
Write-off against other income	(4,823		)	(1,143		)	(3,843		)
Interest reclassified to property, construction, and office equipment	(485		)	(1,111		)
Interest capitalized on investments in unconsolidated entities	(8,824		)	(5,818		)	(7,467		)
Previously capitalized interest transferred to investments in unconsolidated entities	(8,708		)
Previously capitalized interest on investments in unconsolidated entities transferred to inventory	2,358			699			16,035
Interest capitalized, end of year	$	352,049		$	369,419		$	373,128

During fiscal 2017, we reclassified $9.0 million of inventory related to two golf courses to property, construction, and office equipment and such amount was net of $3.5 million transferred to accrued liabilities related to deferred golf membership fees.

During fiscal 2016, we reclassified $17.1 million of inventory related to two golf course facilities and a parking garage to property, construction, and office equipment and such amount was net of $2.1 million transferred to accrued liabilities related to deferred golf membership fees. The amounts were reclassified due to the completion of construction of the facilities and the substantial completion of the master planned communities of which the golf facilities are a part.

During fiscal 2015, we transferred $132.3 million from investment in unconsolidated entities to inventory. The transfer related to the transfer of title of condominium units built by a Home Building Joint Venture to us.