Generally, I agree with that. For anyone older than a young child, No, absolutely not acceptable. For anyone above a very low, intro level rank, No, absolutely not acceptable.
In my system, we have had kids who reaaaally want to progress, and have taken classes for a year or more and are still the only one with a plain ol' white belt, while some of their most talented or hardest training friends are already wearing a Yellow Belt. They get discouraged, they get frustrated, they feel like they are hopeless and they want to quit. Obviously, if they don't know and can't perform the required material, they shouldn't get a rank. But if they were sedentary, parked-in-front-of-the-TV kids until they got here, and they're trying but just can't catch up yet? I can see the value of giving them that first kid-rank yellow stripe, with a firm reminder that they were promoted for TRYING, and that they will NOT be promoted again until they reach an acceptable level.
Whenever a situation like this arises, there is generally lively debate, post-test, pre-promotion, between those who fear the kid will disappear and want to get him/her to keep trying, and those who are hard-line against sub-par promotions at any level. So yeah, don't give a kid a green belt to keep him happy, and don't charity promote ANYONE who's at all into double-digit ages, and don't get into the habit of promoting kids to keep them entertained. But in rare cases, I'd rather see a kid with a rank they don't quite live up to grow into it and possibly become a strong student of the martial arts, then see them drop it and not look back, even if it does preserve the complete purity of the ranking system.
Then again, I'd rather get rid of the ranking system entirely, and eliminate any danger of people training for coloured fabric rather than knowledge.