Summary of Significant Accounting Policies

12 Months Ended

Nov. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Operations.  KB Home is a builder of attached and detached single-family residential homes, townhomes and

condominiums.  As of November 30, 2024, we conducted ongoing operations in Arizona, California, Colorado, Florida, Idaho,

Nevada, North Carolina, Texas and Washington.  We also offer property and casualty insurance and, in certain instances,

earthquake, flood and personal property insurance to our homebuyers in the same markets as our homebuilding reporting

segments, and provide title services in the majority of our markets located within our Southwest, Central and Southeast

homebuilding reporting segments.  We offer mortgage banking services, including mortgage loan originations, to our

homebuyers indirectly through KBHS, which is an unconsolidated joint venture between us and a third party.

Basis of Presentation.  Our consolidated financial statements have been prepared in accordance with GAAP and include

our accounts and those of the consolidated subsidiaries in which we have a controlling financial interest.  All intercompany

balances and transactions have been eliminated in consolidation.  Investments in unconsolidated joint ventures in which we

have less than a controlling financial interest are accounted for using the equity method.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make

estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes. 

Actual results could differ from those estimates.

Cash and Cash Equivalents.  We consider all highly liquid short-term investments purchased with an original maturity of

three months or less to be cash equivalents.  Our cash equivalents totaled $385.1 million at November 30, 2024 and $508.2

million at November 30, 2023.  At November 30, 2024 and 2023, our cash equivalents were mainly invested in interest-bearing

bank deposit accounts and money market funds.

Receivables.  We record receivables net of an allowance for doubtful accounts.  This allowance for potential losses is

established or maintained for expected uncollectible receivables.  The allowance is estimated based on our evaluation of the

receivables, taking into account historical collection experience, general economic conditions, specific credit risk of the

counterparties and other relevant information.

Property and Equipment and Depreciation.  Property and equipment are recorded at cost and are depreciated using the

straight-line method over their estimated useful lives as follows: computer software and equipment – two to 15 years; model

furnishings and sales office improvements – two to three years; office furniture and equipment – three to 10 years; and

leasehold improvements – life of the lease.  Repair and maintenance costs are expensed as incurred.  Depreciation expense

totaled $37.3 million in 2024, $36.4 million in 2023 and $32.3 million in 2022.

Investments in Equity Securities.  We have elected to measure our investments in equity securities without readily

determinable fair values at cost less impairment, if any, including adjustments for observable price changes in orderly

transactions for an identical or similar investment of the same issuer.  These investments, which totaled $15.2 million at

November 30, 2024 and zero as of November 30, 2023, are included in other assets in our consolidated balance sheets.

Homebuilding Operations.  We recognize homebuilding revenue by applying the following steps in determining the timing

and amount of revenue to recognize: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the

contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, if

applicable; and (5) recognize revenue when (or as) we satisfy a performance obligation.

Our home sale transactions are made pursuant to contracts under which we typically have a single performance obligation

to deliver a completed home to the homebuyer when closing conditions are met.  Revenues from home sales are recognized

when we have satisfied the performance obligation within the sales contract, which is generally when title to and possession of

the home and the risks and rewards of ownership are transferred to the homebuyer on the closing date.  Under our home sales

contracts, we typically receive an initial cash deposit from the homebuyer at the time the sales contract is executed and receive

the remaining consideration to which we are entitled, through a third-party escrow agent, at closing.  Customer deposits related

to sold but undelivered homes are included in accrued expenses and other liabilities.

Concurrent with the recognition of revenues in our consolidated statements of operations, sales incentives in the form of

price concessions on the selling price of a home or mortgage-related concessions are recorded as a reduction of revenues. 

When we provide sales incentives in the form of free products or services to homebuyers, the costs of the free products or

services are reflected as construction and land costs because such incentives are identified in our home sales contracts with

homebuyers as an intrinsic part of our single performance obligation to deliver and transfer title to their home for the

transaction price stated in the contracts.  Sales incentives that we may provide in the form of closing cost allowances are

immaterial to the related revenues. Cash proceeds from home sale closings held by third-party escrow agents for our benefit,

typically for less than five days, are considered deposits in-transit and classified as cash. 

We may periodically elect to sell parcels of land to third parties if such assets no longer fit into our strategic operating plans

or are zoned for non-residential development.  Land sale transactions are made pursuant to contracts under which we typically

have a performance obligation(s) to deliver specified land parcels to the buyer when closing conditions are met.  We evaluate

each land sales contract to determine our performance obligation(s) under the contract, including whether we have a distinct

promise to perform post-closing land development work that is material within the context of the contract, and use objective

criteria to determine our completion of the applicable performance obligation(s), whether at a point in time or over time. 

Revenues from land sales are recognized when we have satisfied the performance obligation(s) within the sales contract, which

is generally when title to and possession of the land and the risks and rewards of ownership are transferred to the land buyer on

the closing date.  Under our land sales contracts, we typically receive an initial cash deposit from the buyer at the time the

contract is executed and receive the remaining consideration to which we are entitled, through a third-party escrow agent, at

closing.  In the limited circumstances where we provide financing to the land buyer, we determine that collectability of the

receivable is reasonably assured before we recognize revenue.

In instances where we have a distinct and material performance obligation(s) within the context of a land sales contract to

perform land development work after the closing date, a portion of the transaction price under the contract is allocated to such

performance obligation(s) and is recognized as revenue over time based upon our estimated progress toward the satisfaction of

the performance obligation(s).  We generally measure our progress based on our costs incurred relative to the total costs

expected to satisfy the performance obligation(s).  While the payment terms for such a performance obligation(s) vary, we

generally receive the final payment when we have completed our land development work to the specifications detailed in the

applicable land sales contract and it has been accepted by the land buyer.

Homebuilding revenues include forfeited deposits, which occur when home sales or land sales contracts, if any, that

involve a nonrefundable deposit are cancelled.  Revenues from forfeited deposits are immaterial.

Within our homebuilding operations, substantially all of our contracts with customers and the related performance

obligations have an original expected duration of one year or less.

Construction and land costs are comprised of direct and allocated costs, including estimated future costs for the limited

warranty we provide on our homes, and certain amenities within a community.  Land acquisition, land development and other

common costs are generally allocated on a relative fair value basis to the homes or lots within the applicable community or land

parcel.  Land acquisition and land development costs include related interest and real estate taxes. 

Disaggregation of Revenues. Our homebuilding operations accounted for 99.6%, 99.5% and 99.7% of our total revenues

for the years ended November 30, 2024, 2023 and 2022, respectively, with most of those revenues generated from home sales

contracts with customers.  Due to the nature of our revenue-generating activities, we believe the disaggregation of revenues as

reported in our consolidated statements of operations, and as disclosed by homebuilding reporting segment in Note 2 – Segment

Information and for our financial services reporting segment in Note 3 – Financial Services, fairly depicts how the nature,

amount, timing and uncertainty of cash flows are affected by economic factors.

Inventories.  Housing and land inventories are stated at cost, unless the carrying value is determined not to be recoverable,

in which case the affected inventories are written down to fair value or fair value less associated costs to sell.  Real estate assets,

such as our housing and land inventories, are tested for recoverability whenever events or changes in circumstances indicate

that their carrying value may not be recoverable.  Recoverability is measured by comparing the carrying value of an asset to the

undiscounted future net cash flows expected to be generated by the asset.  These impairment evaluations are significantly

impacted by estimates for the amounts and timing of future revenues, costs and expenses, and other factors.  If the carrying

value of a real estate asset is determined not to be recoverable, the impairment charge to be recognized is measured by the

amount by which the carrying value of the affected asset exceeds its estimated fair value.  For land held for sale, if the fair value

less associated costs to sell exceeds the asset’s carrying value, no impairment charge is recognized.

Capitalized Interest.  Interest is capitalized to inventories while the related communities or land parcels are being actively

developed and until homes are completed or the land is available for immediate sale.  Capitalized interest is amortized to

construction and land costs as the related inventories are delivered to homebuyers or land buyers (as applicable).  In the case of

land held for future development and land held for sale, applicable interest is expensed as incurred. 

Fair Value Measurements.  Fair value measurements are used for inventories on a nonrecurring basis when events and

circumstances indicate that their carrying value is not recoverable.  For these real estate assets, fair value is determined based on

the estimated future net cash flows discounted for inherent risk associated with each such asset, or other valuation techniques.

Our financial instruments consist of cash and cash equivalents, corporate-owned life insurance, outstanding borrowings

under the Credit Facility, if any, and the Term Loan, senior notes, and mortgages and land contracts due to land sellers and

other loans.  Fair value measurements of financial instruments are determined by various market data and other valuation

techniques as appropriate.  When available, we use quoted market prices in active markets to determine fair value.

Financial Services Operations.  Our financial services reporting segment, which includes the operations of KB HOME

Mortgage Company, generates revenues primarily from insurance commissions and title services. Revenues from title services

are recognized when policies are issued, which generally occurs at the time each applicable home sale is closed.  We receive

commissions from various third-party insurance carriers for arranging for the carriers to provide homeowner and other

insurance policies for our homebuyers that elect to obtain such coverage.  In addition, each time a homebuyer renews their

insurance policy with the insurance carrier, we receive a renewal commission.  Revenues from insurance commissions are

recognized when the insurance carrier issues an initial insurance policy to our homebuyer, which generally occurs at the time

each applicable home sale is closed.  As our performance obligations for policy renewal commissions are satisfied upon

issuance of the initial insurance policy, insurance commissions for renewals are considered variable consideration. 

Accordingly, we estimate the probable future renewal commissions when an initial policy is issued and record a corresponding

contract asset and insurance commission revenues.  We estimate the amount of variable consideration based on historical

renewal trends and constrain the estimate such that it is probable that a significant reversal of cumulative recognized revenue

will not occur.  We also consider the likelihood and magnitude of a potential future reversal of revenue and update our

assessment at the end of each reporting period.  The contract assets for estimated future renewal commissions are included in

other assets within our financial services reporting segment.

Warranty Costs.  We provide a limited warranty on all of our homes.  We estimate the costs that may be incurred under

each limited warranty and record a liability in the amount of such costs at the time the revenue associated with the sale of each

home is recognized.  Our primary assumption in estimating the amounts we accrue for warranty costs is that historical claims

experience is a strong indicator of future claims experience.  Factors that affect our warranty liability include the number of

homes delivered, historical and anticipated rates of warranty claims, and cost per claim.  We periodically assess the adequacy of

our accrued warranty liability and adjust the amount as necessary based on our assessment. Our warranty liability is presented

on a gross basis for all years without consideration of recoveries and amounts we have paid on behalf of and expect to recover

from other parties, if any.  Estimates of recoveries and amounts we have paid on behalf of and expect to recover from other

parties, if any, are recorded as receivables when such recoveries are considered probable.

Self-Insurance.  We self-insure a portion of our overall risk through the use of a captive insurance subsidiary.  We record

liabilities based on the estimated costs required to cover reported claims, claims incurred but not yet reported, and claim

adjustment expenses.  These estimated costs are based on an actuarial analysis of our historical claims and expense data, as well

as industry data.  Our self-insurance liability is presented on a gross basis for all years without consideration of

insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.  Estimates of

insurance recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any, are recorded as

receivables when such recoveries are considered probable.

Community Sales Office and Other Marketing- and Model Home-Related Costs.  Community sales office and other

marketing- and model home-related costs are either recorded as inventories, capitalized as property and equipment, or expensed

to selling, general and administrative expenses as incurred.  Costs related to the construction of a model home, inclusive of

design choices and options that will be sold as part of the home, are recorded as inventories and recognized as construction and

land costs when the model home is delivered to a homebuyer.  Costs to furnish and ready a model home or on-site community

sales facility that will not be sold as part of the model home, such as costs for model furnishings, community sales office and

model complex grounds, sales office construction and sales office furniture and equipment, are capitalized as property and

equipment under “model furnishings and sales office improvements.”  Model furnishings and sales office improvements are

depreciated to selling, general and administrative expenses over their estimated useful lives.  Other costs related to the

marketing of a community, removing the on-site community sales facility and readying a completed (model) home for sale are

expensed to selling, general and administrative expenses as incurred.

Advertising Costs.  We expense advertising costs as incurred.  We incurred advertising costs of $39.9 million in 2024,

$34.2 million in 2023 and $37.1 million in 2022.

Legal Fees.  Legal fees associated with litigation and similar proceedings that are not expected to provide a benefit in

future periods are generally expensed as incurred.  Legal fees associated with land acquisition and development and other

activities that are expected to provide a benefit in future periods are capitalized to inventories in our consolidated balance sheets

as incurred.  We expensed legal fees of $8.7 million in 2024, $10.4 million in 2023 and $10.6 million in 2022.

Stock-Based Compensation.  We measure and recognize compensation expense associated with our grant of equity-based

awards at an amount equal to the fair value of share-based payments granted under compensation arrangements over the vesting

period.  We estimate the fair value of stock options granted using the Black-Scholes option-pricing model with assumptions

based primarily on historical data.  We estimate the fair value of other equity-based awards using the closing price of our

common stock on the grant date.  For PSUs, we recognize compensation expense ratably over the vesting period when it is

probable that stated performance targets will be achieved and record cumulative adjustments in the period in which estimates

change.  We account for forfeitures of equity-based awards as they occur.

Income Taxes.  The provision for, or benefit from, income taxes is calculated using the asset and liability method, under

which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of

assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Deferred tax

assets are evaluated on a quarterly basis to determine if adjustments to the valuation allowance are required.  This evaluation is

based on the consideration of all available positive and negative evidence using a “more likely than not” standard with respect

to whether deferred tax assets will be realized.  The ultimate realization of our deferred tax assets depends primarily on our

ability to generate future taxable income during the periods in which the related deferred tax assets become deductible.  The

value of deferred tax assets in our consolidated balance sheets depends on applicable income tax rates. 

Accumulated Other Comprehensive Loss.  The accumulated balances of other comprehensive loss in the consolidated

balance sheets as of November 30, 2024 and 2023 were comprised solely of adjustments recorded directly to accumulated other

comprehensive loss related to our benefit plan obligations.  Such adjustments are made annually as of November 30, when our

benefit plan obligations are remeasured.

Earnings Per Share.  We compute earnings per share using the two-class method, which is an allocation of earnings

between the holders of common stock and a company’s participating security holders.  Our outstanding nonvested shares of

restricted stock contain non-forfeitable rights to dividends and, therefore, are considered participating securities for purposes of

computing earnings per share pursuant to the two-class method.  We had no other participating securities at November 30,

2024, 2023 or 2022.

Recent Accounting Pronouncements Not Yet Adopted.  In November 2023, the FASB issued Accounting Standards Update

No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is

intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant

segment expenses.  The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within

fiscal years beginning after December 15, 2024.  Early adoption is permitted.  The guidance is to be applied retrospectively to

all prior periods presented in the financial statements.  Upon transition, the segment expense categories and amounts disclosed

in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of

adoption.  We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial

statements and related disclosures.

In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”), which modifies the rules on income tax disclosures to require

entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before

income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing

operations (separated by federal, state and foreign).  ASU 2023-09 also requires entities to disclose their income tax payments

to international, federal, state and local jurisdictions, among other changes.  The guidance is effective for annual periods

beginning after December 15, 2024.  Early adoption is permitted for annual financial statements that have not yet been issued or

made available for issuance.  ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. 

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and

related disclosures.

In November 2024, the FASB issued Accounting Standards Update No. 2024-03, “Income Statement — Reporting

Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement

Expenses” (“ASU 2024-03”), which requires disclosure of certain costs and expenses on an interim and annual basis in the

notes to the consolidated financial statements.  The guidance is effective for annual reporting periods beginning after December

15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027.  Early adoption is permitted. 

The guidance is to be applied either (1) prospectively to financial statements issued for reporting periods after the effective date

or (2) retrospectively to any or all prior periods presented in the financial statements.  We are currently evaluating the potential

impact of adopting this new guidance on our consolidated financial statements and related disclosures. 

Reclassifications.  Certain amounts in our consolidated financial statements of prior years have been reclassified to

conform to the current period presentation.