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Inventory And Land Held For Sale | 9 Months Ended
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Sep. 30, 2013
Inventory Disclosure [Abstract] |
Inventory Disclosure | Inventory and land held for sale Major components of inventory were as follows ($000’s omitted):
| September 30, 2013 |  | December 31, 2012
Homes under construction | $ | 1,277,648 |  |  | $ | 1,116,184 |
Land under development | 2,117,653 |  |  | 2,435,378 |
Raw land | 755,663 |  |  | 662,484 |
| $ | 4,150,964 |  |  | $ | 4,214,046 |
We capitalize interest cost into inventory during the active development and construction of our communities. Each layer of capitalized interest is amortized over a period that approximates the average life of communities under development. Interest expense is recorded based on the timing of home closings. Interest expensed to Homebuilding home sale cost of revenues included capitalized interest related to inventory impairments of $0.8 million and $1.9 million, for the three months ended September 30, 2013 and 2012, respectively, and $2.7 million and $4.9 million for the nine months ended September 30, 2013 and 2012, respectively. In all periods presented, we capitalized all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels. Information related to interest capitalized into inventory is as follows ($000’s omitted):
| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
| 2013 |  | 2012 |  | 2013 |  | 2012
Interest in inventory, beginning of period | $ | 298,575 |  |  | $ | 358,451 |  |  | $ | 331,880 |  |  | $ | 355,068 |
Interest capitalized | 35,962 |  |  | 50,730 |  |  | 118,527 |  |  | 153,369 |
Interest expensed | (68,013 | ) |  | (57,155 | ) |  | (183,883 | ) |  | (156,411 | )
Interest in inventory, end of period | $ | 266,524 |  |  | $ | 352,026 |  |  | $ | 266,524 |  |  | $ | 352,026 |
Interest incurred* | $ | 35,962 |  |  | $ | 50,730 |  |  | $ | 118,527 |  |  | $ | 153,369 |
* | Homebuilding interest incurred includes interest on senior debt and certain other financing arrangements.
Land valuation adjustments and write-offs Impairment of inventory We record valuation adjustments on land inventory and related communities under development when events and circumstances indicate that they may be impaired and when the cash flows estimated to be generated by those assets are less than their carrying amounts. Such indicators include gross margin or sales paces significantly below expectations, construction costs or land development costs significantly in excess of budgeted amounts, significant delays or changes in the planned development for the community, and other known qualitative factors. For communities that are not yet active, an additional consideration includes an evaluation of the probability, timing, and cost of obtaining necessary approvals from municipalities and any potential concessions that may be necessary in order to obtain such approvals. We also consider potential changes to the product offerings in a community and any alternative strategies for the land, such as the sale of the land either in whole or in parcels. Communities that demonstrate potential impairment indicators are tested for impairment. We compare the expected undiscounted cash flows for these communities to their carrying values. For those communities whose carrying values exceed the expected undiscounted cash flows, we estimate the fair value of the community. Impairment charges are recorded if the fair value of the community's inventory is less than its carrying value. We determine the fair value of a community's inventory using a combination of market comparable land transactions, where available, and discounted cash flow models. These estimated cash flows are significantly impacted by estimates related to expected average selling prices, expected sales paces, expected land development and construction timelines, and anticipated land development, construction, and overhead costs. The assumptions used in the discounted cash flow models are specific to each community tested for impairment. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, and the long life cycles of many communities, actual results could differ significantly from such estimates. Our determination of fair value also requires discounting the estimated cash flows at a rate commensurate with the inherent risks associated with each of the assets and related estimated cash flow streams. The discount rate used in determining each community's fair value depends on the stage of development of the community and other specific factors that increase or decrease the inherent risks associated with the community's cash flow streams. For example, communities that are entitled and near completion will generally be assigned a lower discount rate than communities that are not entitled and consist of multiple phases spanning several years of development and construction. During the three and nine months ended September 30, 2013 and 2012, we reviewed each of our land positions for potential impairment. As a result of these reviews, we recorded impairments of $0.8 million and $2.3 million during the three months ended September 30, 2013 and 2012, respectively, and $2.7 million and $9.6 million during the nine months ended September 30, 2013 and 2012, respectively, which are recorded within Homebuilding home sale cost of revenues. Our evaluations for impairments recorded to date were based on our best estimates of the future cash flows for our communities. However, if conditions in the homebuilding industry or our local markets worsen in the future or if our strategy related to certain communities changes, we may be required to evaluate our assets for further impairments or write-downs, which could result in future charges that might be significant. Net realizable value adjustments – land held for sale Land held for sale is valued at the lower of carrying value or fair value less costs to sell. In determining the value of land held for sale, we consider recent offers received, prices for land in recent comparable sales transactions, and other factors. During the three months ended September 30, 2013 and 2012, we recognized net realizable value adjustments related to land held for sale of $0.1 million and $0.2 million, respectively. Such adjustments totaled $2.3 million and $1.3 million during the nine months ended September 30, 2013 and 2012, respectively. We record these net realizable value adjustments within Homebuilding land sale cost of revenues. During 2013, the decrease in the gross land held for sale and net realizable value reserve balances resulted primarily from the sale of land parcels, certain of which were previously impaired. Land held for sale was as follows ($000’s omitted):
| September 30, 2013 |  | December 31, 2012
Land held for sale, gross | $ | 73,698 |  |  | $ | 135,201 |
Net realizable value reserves | (8,598 | ) |  | (44,097 | )
Land held for sale, net | $ | 65,100 |  |  | $ | 91,104 |
Write-off of deposits and pre-acquisition costs We wrote off deposits and pre-acquisition costs in the amount of $0.8 million and $0.9 million during the three months ended September 30, 2013 and 2012, respectively, and $1.4 million and $1.8 million during the nine months ended September 30, 2013 and 2012, respectively. We record these write-offs of deposits and pre-acquisition costs within other expense (income), net.

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- Definition The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6361739&loc=d3e7789-107766 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.6) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 6 -Subparagraph a, b, c -Article 5 + Details
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