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KB HOME Fair Value Disclosure

10-KFiled Jan 23, 20262 min read
Fair Value Disclosures
Fair value measurements of assets and liabilities are categorized based on the following hierarchy:
Level 1Fair value determined based on quoted prices in active markets for identical assets or liabilities.
Level 2Fair value determined using significant observable inputs, such as quoted prices for similar assets or liabilities
or quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the asset or liability, or inputs that are derived principally from or
corroborated by observable market data, by correlation or other means.
Level 3Fair value determined using significant unobservable inputs, such as pricing models, discounted cash flows, or
similar techniques.
Fair value measurements are used for inventories on a nonrecurring basis when events and circumstances indicate that their
carrying value is not recoverable. These measurements are generally Level 3 within the fair value hierarchy.  See Note 7 –
Inventory Impairments and Land Option Contract Abandonments for information regarding the valuation of these assets.
November 30, 2025
November 30, 2024
Description
Fair Value
Hierarchy
Pre-
Impairment
Value
Inventory
Impairment
Charges
Fair Value (a)
Pre-
Impairment
Value
Inventory
Impairment
Charges
Fair Value (a)
Inventories
Level 3
$54,095
$(15,531)
$38,564
$—
$—
$—
(a)Amounts represent the aggregate fair value for real estate assets impacted by inventory impairment charges during the
applicable period, as of the date that the fair value measurements were made.  The carrying value for these real estate assets
may have subsequently increased or decreased from the fair value reflected due to activity that has occurred since the
measurement date.
The following table presents the fair value hierarchy, carrying values and estimated fair values of our financial instruments,
except those for which the carrying values approximate fair values (in thousands): 
 
November 30,
 
2025
2024
Description
Fair Value
Hierarchy
Carrying
Value (a)
Estimated
Fair Value
Carrying
Value (a)
Estimated
Fair Value
Financial Liabilities:
Senior notes
Level 2
$1,331,584
$1,333,188
$1,329,704
$1,309,700
(a)The carrying value for the senior notes, as presented, includes unamortized debt issuance costs.  Debt issuance costs are not
factored into the estimated fair values of these notes.
The fair values of our senior notes are generally estimated based on quoted market prices for these instruments.  The
carrying values reported for cash and cash equivalents, outstanding borrowings under the Credit Facility, if any, and the Term
Loan, and mortgages and land contracts due to land sellers and other loans approximate fair values.  The carrying value of
corporate-owned life insurance is based on the cash surrender value of the policies and, accordingly, approximates fair value.
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About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

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