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Inventory Impairments and Land Option Contract Abandonments | 9 Months Ended
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Aug. 31, 2014
Inventory Impairments and Land Option Contract Abandonments [Abstract] |
Inventory Impairments and Land Option Contract Abandonments | Inventory Impairments and Land Option Contract Abandonments Each community or land parcel in our owned inventory is assessed on a quarterly basis to determine if indicators of potential impairment exist. In accordance with Accounting Standards Codification Topic No. 360, “Property, Plant, and Equipment” (“ASC 360”), we record an inventory impairment charge when indicators of potential impairment exist and the carrying value of a real estate asset is greater than the undiscounted future net cash flows the asset is expected to generate. These real estate assets are written down to fair value, which is primarily based on the estimated future net cash flows discounted for inherent risk associated with each such asset. We evaluated 20 and 16 communities or land parcels for recoverability during the three months ended August 31, 2014 and 2013, respectively. We evaluated 42 and 54 communities or land parcels for recoverability during the nine months ended August 31, 2014 and 2013, respectively. Some of the communities or land parcels evaluated during the nine months ended August 31, 2014 and 2013 were evaluated in more than one quarterly period. Based on the results of our evaluations, we recognized $3.4 million of inventory impairment charges for the three months and nine months ended August 31, 2014 associated with a planned future sale of our last remaining land parcel in Atlanta, Georgia, a former market where we do not have ongoing operations. We decided to change our strategy with regard to this land parcel in the third quarter of 2014 and monetize this property through a land sale, rather than build and sell homes on the parcel as we had previously intended. This land sale is expected to close in the 2014 fourth quarter. We had no inventory impairment charges in the three months and nine months ended August 31, 2013. As of August 31, 2014, the aggregate carrying value of our inventory that had been impacted by inventory impairment charges was $292.0 million, representing 34 communities and various other land parcels. As of November 30, 2013, the aggregate carrying value of our inventory that had been impacted by inventory impairment charges was $293.1 million, representing 42 communities and various other land parcels. Our inventory controlled under land option contracts and other similar contracts is assessed on a quarterly basis to determine whether it continues to meet our internal investment and marketing standards. When a decision is made not to exercise certain land option contracts and other similar contracts due to market conditions and/or changes in our strategy, we write off the related inventory costs, including non-refundable deposits and unrecoverable pre-acquisition costs. Based on the results of our assessments, we recognized $1.0 million of land option contract abandonment charges corresponding to 624 lots for the three months ended August 31, 2014, and $1.8 million of such charges corresponding to 1,306 lots for the nine months ended August 31, 2014. We had no land option contract abandonment charges for the three months ended August 31, 2013 and $.3 million of such charges corresponding to 82 lots for the nine months ended August 31, 2013. We sometimes abandon land option contracts and other similar contracts when we have incurred costs of less than $100,000; such costs and the corresponding lots, which totaled 7,018 lots for the nine months ended August 31, 2014 and 4,681 lots for the nine months ended August 31, 2013, are not included in the amounts above. The estimated remaining life of each community or land parcel in our inventory depends on various factors, such as the total number of lots remaining; the expected timeline to acquire and entitle land and develop lots to build homes; the anticipated future net order and cancellation rates; and the expected timeline to build and deliver homes sold. While it is difficult to determine a precise timeframe for any particular inventory asset, we estimate our inventory assets’ remaining operating lives under current and expected future market conditions to range generally from one year to in excess of 10 years. Based on current market conditions and anticipated home delivery timelines, we expect to realize, on an overall basis, the majority of our current inventory balance within five years. Due to the judgment and assumptions applied in the estimation process with respect to inventory impairments, land option contract abandonments, the remaining operating lives of our inventory assets and the realization of our inventory balances, it is possible that actual results could differ substantially from those estimated.

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- Definition Inventory impairments and land option contract abandonments. + References No definition available. + Details
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