We track hours at my dojo (just as in my sensei's dojo). The hours are a minimum requirement but do not mean a person will test at that time. Ulitimately it is up to the sensei whether or not a student will test and pass, though it is rare to have a student fail.
I'm not sure what you mean Brian about other martial arts experience being taken into consideration. I am assuming that you mean overall ability and skill demonstrated during the test. Otherwise I don't feel that external martial arts experience has anything to do with the current martial art one is studying.
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I think the instructor(s) should determine when a test is appropriate based on their observations
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I agree with this.