PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The consolidated financial statements of the Company included herein include the assets, liabilities and results of operations of the Company's wholly-owned subsidiaries and the investments and operating results of joint ventures recorded under the equity method as listed below. All significant intercompany accounts and transactions have been eliminated in consolidation. The table below shows the Company's percentage ownership of, and basis of presentation for, each subsidiary as of August 31, 2011.

Subsidiary Countries Ownership Basis of Presentation PriceSmart, Aruba 100.0% Consolidated PriceSmart, Barbados 100.0% Consolidated PriceSmart, Colombia 100.0% Consolidated PSMT Caribe, Inc.: Costa Rica 100.0% Consolidated Dominican Republic 100.0% Consolidated El Salvador 100.0% Consolidated Honduras 100.0% Consolidated PriceSmart, Guam Guam 100.0% Consolidated(1) PriceSmart, Guatemala 100.0% Consolidated PriceSmart Holdings, Inc. St. Lucia 100.0% Consolidated(2) PriceSmart, Jamaica 100.0% Consolidated PriceSmart, Nicaragua 100.0% Consolidated PriceSmart, Panama 100.0% Consolidated PriceSmart Exempt SRL Barbados 100.0% Consolidated(2) PriceSmart, Trinidad St. Lucia/Trinidad 100.0% Consolidated(3) PriceSmart, U.S. Virgin Islands U.S. Virgin Islands 100.0% Consolidated GolfPark Plaza, S.A. Panama 50.0% Equity(4) Price Plaza Alajuela PPA, S.A. Costa Rica 50.0% Equity(4) Newco2 Costa Rica 50.0% Equity(4)(5)

(1) Entity is treated as discontinued operations in the consolidated financial statements. (2) These companies act as investment and holding companies for the Company’s subsidiaries in Trinidad and Jamaica. (3) The Company acquired the remaining 5% ownership in May 2010. (See Note 15 – Acquisition of Noncontrolling Interest). (4) Purchases of joint venture interests during the first quarter of fiscal year 2009 are recorded as investment in unconsolidated affiliates on the consolidated balance sheets. (5) On September 29, 2011, the Company exercised its option to cancel its participation in this joint venture. (See Note 19 – Subsequent Events).

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Variable Interest Entities – The Company reviews and determines at the start of each arrangement, or subsequently if a reconsideration event occurs, whether any of its investments in joint ventures are a Variable Interest Entity (“VIE”) and whether it must consolidate a VIE and/or disclose information about its involvement in a VIE. The Company has determined that the joint ventures for GolfPark Plaza, Price Plaza Alajuela and Newco2 are VIEs. The Company has determined that it is not the primary beneficiary of the VIEs and, therefore, has accounted for these entities under the equity method.

Cash and Cash Equivalents – Cash and cash equivalents represent cash and short-term investments with maturities of three months or less when purchased.

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