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Note 5 | 9 Months Ended
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Jul. 31, 2011
Inventory Impairments And Land Option Cost Write Offs [Text Block] | 5. We record impairment losses on inventories related to communities under development and held for future development when events and circumstances indicate that they may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their related carrying amounts. If the expected undiscounted cash flows are less than the carrying amount, then the community is written down to its fair value. We estimate the fair value of each impaired community by determining the present value of the estimated future cash flows at a discount rate commensurate with the risk of the respective community. For the nine months ended July 31, 2011, our discount rates used for the impairments recorded ranged from 17.5% to 19.8%. Should the estimates or expectations used in determining cash flows or fair value decrease or differ from current estimates in the future, we may need to recognize additional impairments. We recorded impairment losses, which are included in the Condensed Consolidated Statement of Operations line entitled "Inventory impairment loss and land option write-offs", and deducted from inventory, of $5.1 million and $49.7 million for the three months ended July 31, 2011 and 2010, respectively, and $28.2 million and $54.1 million for the nine months ended July 31, 2011 and 2010, respectively. The following table represents inventory impairments by homebuilding segment for the three and nine months ended July 31, 2011 and 2010:
|  | Three Months Ended |  |  | Three Months Ended |
(Dollars in millions) |  | July 31, 2011 |  |  | July 31, 2010 |
|  | Number of Communities |  |  | Dollar Amount of Impairment |  |  | Pre- Impairment Value(1) |  |  | Number of Communities |  |  | Dollar Amount of Impairment |  |  | Pre- Impairment Value(1) |
Northeast |  |  | - |  |  | $ | - |  |  | $ | - |  |  |  | 6 |  |  | $ | 13.5 |  |  | $ | 29.8 |
Mid-Atlantic |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Midwest |  |  | 1 |  |  |  | 0.4 |  |  |  | 0.9 |  |  |  | - |  |  |  | - |  |  |  | - |
Southeast |  |  | 10 |  |  |  | 1.5 |  |  |  | 4.9 |  |  |  | 7 |  |  |  | 1.1 |  |  |  | 3.8 |
Southwest |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | 0.1 |  |  |  | 0.2 |
West |  |  | 2 |  |  |  | 3.2 |  |  |  | 10.9 |  |  |  | 14 |  |  |  | 35.0 |  |  |  | 48.4 |
Total |  |  | 13 |  |  | $ | 5.1 |  |  | $ | 16.7 |  |  |  | 28 |  |  | $ | 49.7 |  |  | $ | 82.2 |
|  | Nine Months Ended |  |  | Nine Months Ended |
(Dollars in millions) |  | July 31, 2011 |  |  | July 31, 2010 |
|  | Number of Communities |  |  | Dollar Amount of Impairment |  |  | Pre- Impairment Value(1) |  |  | Number of Communities |  |  | Dollar Amount of Impairment |  |  | Pre- Impairment Value(1) |
Northeast |  |  | 5 |  |  | $ | 17.7 |  |  | $ | 88.6 |  |  |  | 8 |  |  | $ | 16.6 |  |  | $ | 35.5 |
Mid-Atlantic |  |  | 3 |  |  |  | 2.1 |  |  |  | 10.9 |  |  |  | 2 |  |  |  | 0.5 |  |  |  | 1.5 |
Midwest |  |  | 1 |  |  |  | 0.4 |  |  |  | 0.9 |  |  |  | - |  |  |  | - |  |  |  | - |
Southeast |  |  | 10 |  |  |  | 1.5 |  |  |  | 4.9 |  |  |  | 13 |  |  |  | 1.5 |  |  |  | 5.0 |
Southwest |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | 0.2 |  |  |  | 0.4 |
West |  |  | 4 |  |  |  | 6.5 |  |  |  | 21.5 |  |  |  | 15 |  |  |  | 35.3 |  |  |  | 48.8 |
Total |  |  | 23 |  |  | $ | 28.2 |  |  | $ | 126.8 |  |  |  | 40 |  |  | $ | 54.1 |  |  | $ | 91.2 |
(1) Represents carrying value, net of prior period impairments, if any, at the time of recording the applicable period’s impairments. We also record losses for the write-offs of options, and approval, engineering and capitalized interest costs when we redesign communities and/or abandon certain engineering costs or we do not exercise options because the communities' forecasted profitability is not projected to produce adequate returns on investment commensurate with the risk. Total aggregate write-offs were $6.3 million and $(0.7) million for the three months ended July 31, 2011 and 2010, respectively, and $13.7 million and $1.0 million for the nine months ended July 31, 2011 and 2010, respectively. Occasionally, these write-offs are offset by recovered deposits (sometimes through legal action) that had been written off in a prior period as walk-away costs. These recoveries have not been significant in comparison to the total cost written off. The following table represents write-offs of such costs (after giving effect to any recovered deposits in the applicable period) and the number of lots walked away from by homebuilding segment for the three and nine months ended July 31, 2011 and 2010:
|  | Three Months Ended |
|  | July 31, |
|  | 2011 |  |  | 2010 |
(Dollars in millions) |  | Number of Walk-Away Lots |  |  | Dollar Amount of Write-Offs |  |  | Number of Walk-Away Lots |  |  | Dollar Amount of Write-Offs |
Northeast |  |  | 486 |  |  | $ | 0.8 |  |  |  | - |  |  | $ | - |
Mid-Atlantic |  |  | 485 |  |  |  | 4.8 |  |  |  | - |  |  |  | - |
Midwest |  |  | - |  |  |  | - |  |  |  | 547 |  |  |  | - |
Southeast |  |  | 184 |  |  |  | 0.5 |  |  |  | - |  |  |  | (0.7 | )
Southwest |  |  | 225 |  |  |  | 0.1 |  |  |  | - |  |  |  | - |
West |  |  | - |  |  |  | 0.1 |  |  |  | - |  |  |  | - |
Total |  |  | 1,380 |  |  | $ | 6.3 |  |  |  | 547 |  |  | $ | (0.7 | )
|  | Nine Months Ended |
|  | July 31, |
|  | 2011 |  |  | 2010 |
(Dollars in millions) |  | Number of Walk-Away Lots |  |  | Dollar Amount of Write-Offs |  |  | Number of Walk-Away Lots |  |  | Dollar Amount of Write-Offs |
Northeast |  |  | 1,531 |  |  | $ | 4.0 |  |  |  | 259 |  |  | $ | 1.5 |
Mid-Atlantic |  |  | 2,259 |  |  |  | 5.3 |  |  |  | 184 |  |  |  | 0.1 |
Midwest |  |  | 230 |  |  |  | 0.4 |  |  |  | 547 |  |  |  | (0.1 | )
Southeast |  |  | 1,357 |  |  |  | 0.8 |  |  |  | - |  |  |  | (0.6 | )
Southwest |  |  | 295 |  |  |  | 0.1 |  |  |  | 409 |  |  |  | 0.1 |
West |  |  | 143 |  |  |  | 3.1 |  |  |  | - |  |  |  | - |
Total |  |  | 5,815 |  |  | $ | 13.7 |  |  |  | 1,399 |  |  | $ | 1.0 |
We have decided to mothball (or stop development on) certain communities where we have determined the current market conditions do not justify further investment at this time. When we decide to mothball a community, the inventory is reclassified from “Sold and unsold homes and lots under development” to “Land and land options held for future development or sale”. During the first three quarters of fiscal 2011, we mothballed five communities but re-activated four previously mothballed communities. In addition, during the nine months ended July 31, 2011, we sold two previously mothballed communities. As of July 31, 2011, the net book value associated with our 57 mothballed communities was $174.4 million, net of impairment charges of $556.2 million.

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- Definition Information about inventory impairments and land option cost write-offs, including the assumptions used in the impairment analysis. + Details
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Period Type: | duration